An austerity policy is
A) an increase in the money supply.
B) an expenditure reduction and expenditure switching policy.
C) an expansionary fiscal policy accompanied by decreases in taxes, increases in expenditures, or both.
D) an exchange rate switching policy from a fixed to a flexible exchange rate system.
B
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Two nations have the following production capacity given their endowment of resources. Country A can produce 50 units of beer or 80 units of pizzas. Country B can produce 100 units of beer or 90 units of pizzas. Which of the following statement is most appropriate?
A. Country A has a comparative advantage in beer and country B has an absolute advantage in pizzas. B. Country A has a comparative advantage in pizza and country B has a comparative advantage in beer. C. Country A has an absolute advantage both products. D. Both b and c are correct.
Suppose a decrease in the supply of wheat results in an increase in revenue. This indicates that
A) the demand curve for wheat must be vertical. B) the resulting increase in price is proportionately greater than decrease in quantity sold. C) the decrease in quantity sold is proportionately larger than the resulting change in price. D) the supply curve for wheat must be vertical.