Assume a candidate for president makes the argument that the United States should not trade with countries that have lower wages than we do because by doing so it will result in an export of American jobs abroad. Critically evaluate this claim
What will be an ideal response?
Wages are tied to productivity. If wages in a country are lower than in another one it is probably because productivity in that country is lower as well which offsets the advantage of having a lower wage. In addition, the comment by the candidate ignores the fact that there are other factors that can give a country a comparative advantage besides low wages. One of which might be cheap capital.
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During the Chinese experience with pegging the yuan to the dollar, the yuan was undervalued. As a result,
A) the prices of Chinese exports were higher than they would have been without the peg. B) the equilibrium value of the yuan was below the pegged value of the yuan. C) there was a surplus of yuan on the market that the Chinese government had to purchase to maintain the peg, depleting China's reserves of dollars. D) there was a surplus of dollars on the market that the Chinese government had to purchase to maintain the peg.
External economies of scale will ________ average cost when output is ________ by ________
A) reduce; increased; the industry B) reduce; increased; a firm C) increase; increased; a firm D) increase; increased; the industry E) reduce; reduce; the industry