If labor productivities were exactly proportional to wage levels internationally, this would
A) not negate the logical basis for trade in the Ricardian model.
B) render the Ricardian model theoretically correct but practically useless.
C) negate the logical basis for trade in the Ricardian model.
D) negate the applicability of the Ricardian model if the number of products were greater than the number of trading partners.
E) demonstrate the validity of the Ricardian model.
A
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The TB (i.e., X- M) is part of the short-run spending equation. With sticky prices, what would be the effect on the TB with an increase (depreciation) of the home nation's exchange rate?
a. Consumers in the home nation would find it more expensive to buy domestic goods compared to foreign goods, and the trade balance would decrease. b. Consumers in the home nation would cut back on both domestic and foreign goods and the trade balance would decrease. c. Consumers in the home nation would increase spending on both domestic and foreign goods, and the trade balance would be unchanged. d. Consumers in the home nation would increase spending on domestic goods and decrease spending on foreign goods, causing the trade balance to increase.
A decrease in the price level in the United States will have what effect on the aggregate expenditure line?
A) Aggregate expenditure will shift downward. B) Aggregate expenditure will shift upward. C) Aggregate expenditure will become steeper. D) Aggregate expenditure will not be affected by a decrease in the price level in the United States.