Critically evaluate the following statement. "If a country has an absolute advantage in the production of everything it necessarily follows that it will have a comparative advantage in the production of everything."
What will be an ideal response?
This is patently false. Absolute advantage only implies that a good can be produced with fewer inputs versus a rival. Comparative advantage means that a good can be produced at lower opportunity cost than a rival. That means that a rival could have an absolute disadvantage in the production of a good or a service and still have a comparative advantage because of its lower opportunity costs.
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Which of the following factors will NOT increase economic development?
A) establishing a system of property rights B) increasing the amount of protectionism C) increasing the amount of education in the population D) creative destruction where old jobs, companies and industries are destroyed
Automatic stabilizers create ________ during recessions from increased government spending on welfare and unemployment insurance, and reduced tax revenues, and create _________ during peak growth periods of the economy from reduced government welfare spending and increased tax revenues.
A. fiscal stimulus, fiscal contraction B. fiscal stimulus, fiscal stimulus C. fiscal contraction, fiscal stimulus D. fiscal contraction, fiscal contraction