If the wagerental ratio in Japanese auto production is lower than the wagerental ratio in U.S. auto production, then:
a. Japan must have a comparative advantage in the production of autos.
b. Japan must have an absolute advantage in the production of autos.
c. auto production costs must be lower in Japan than in the United States.
d. auto production costs could be lower in the United States if U.S. labor productivity is higher than Japanese labor productivity.
Ans: d. auto production costs could be lower in the United States if U.S. labor productivity is higher than Japanese labor productivity.
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Suppose the marginal propensity to consume is 0.8. According to the model in the text, how much would equilibrium output go up if the government increased spending by $500 million (assuming all other factors are held constant)?
Select one: a. $400 million b. $625 million c. $900 million d. $2,500 million
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