Assume that maximum feasible hourly productions levels if all resources are utilized in the United States are either 8 yards of fabric or 4 bushels of wheat. Maximum feasible production levels if all resources are utilized in Japan are either 3 yards of
fabric or 6 bushels of wheat. Based on this information
A) beneficial trade is absolutely impossible between the two countries.
B) the United States will benefit from trading but Japan will not.
C) both nations will gain from specialization and trade, with the United States exporting wheat and Japan exporting fabric.
D) both nations will gain from specialization and trade, with the United States exporting fabric and Japan exporting wheat.
Answer: D
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If adding an initial 100 billion labor hours per year increases real GDP by $3 trillion, diminishing returns informs us that an additional 100 billion labor hours per year will increase real GDP by
A) exactly $3 trillion. B) less than $3 trillion. C) more than $3 trillion. D) either exactly $3 trillion or by less than $3 trillion, depending on whether the real wage rate remains constant or rises. E) some amount but there is not enough information to tell by how much.
When budget deficits take place in a high-employment economy, the effect is an increase in capital stock
a. True b. False Indicate whether the statement is true or false