Unlike the mercantilists, who argued that a nation could only gain at the expense of other nations because not all nations could simultaneously run trade surpluses, Smith maintained that with free trade, international specialization of resources in production leads to an increase in world output that can be shared by trading partners.

It is often observed that, over the same period of time and for the same good, marginal utility declines rapidly for some consumers and very little for others. This observation illustrates:

a. that economic theory is of little value in explaining consumer behavior. b. that consumers are not identical. c. tastes and preferences should not be included in any discussion of consumer choice. d. tastes and preferences among consumers are quite similar. e. that if consumers weren't identical, economic theory would not be able to provide insight into consumer behavior.

A country has a growth rate of 3%. Government spending is 60 billion units of currency and its tax revenues are 32 billion units of currency. The current national debt is 400 billion units of currency. At which inflation rate is its debt-to-income ratio unchanged?

a. 2% b. 3% c. 4% d. 5%