Suppose that Rosie and Betty spend their free time making cakes and cookies
Is it possible for Betty to have an absolute advantage in the production of both cakes and cookies? Is it possible for Betty to have a comparative advantage in the production of both cakes and cookies? Explain.
Yes, it is possible for Betty to have an absolute advantage in the production of cakes and cookies. This simply means that she is able to produce more per hour. However, Betty cannot have a comparative advantage in producing both cakes and cookies. Because the opportunity cost of producing a cookie is the reciprocal of the opportunity cost of making a cake, it is impossible to have the lower opportunity cost of each.
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In the recent Global Economic Crisis, all of the following are causes that pushed the IS curve to the left EXCEPT
A) the negative wealth effect from the collapse of the housing bubble. B) the end of cash-out mortgage refinancing. C) growing unwillingness of banks and nonbank financial institutions to grant loan. D) slow and minimal response of the U.S. government.
The Depository Institutions Deregulation and Monetary Control Act of 1980 accomplished which one of the following reforms?
A. Established a uniform set of reserve requirements for all depository institutions. B. Established maximum and minimum interest rates which depository institutions were permitted to pay on checkable deposits. C. Shifted to the United States Treasury the responsibility for setting the discount rate. D. Provided presidential veto power over setting reserve requirements.