Exhibit 21-2 Production possibilities curves for U.S. and Mexico
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As shown in Exhibit 21-2, the United States has a comparative advantage over Mexico in:

A. wheat, but not in cloth.
B. cloth, but not in wheat.
C. both wheat and cloth.
D. neither wheat nor cloth

Answer: A

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Fill in the blank(s) with the appropriate word(s).

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If aggregate expenditure exceeds GDP, we expect inventories to shrink and firms to increase production

a. True b. False

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