A country producing a combination of 9 units of guns and 6 units of butter would be _____________ (outside/on/inside) the production possibilities curve.

An increase in interest rates due to a decrease in the money supply will

A) reduce aggregate demand. B) not change aggregate demand. C) increase aggregate demand. D) decrease aggregate supply in the short run and in the long run.

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

a. people in Portugal will not want to buy as many hats. b. Spain no longer has a comparative advantage in hats. c. Portugal is flooding the market with too many doormats. d. some of the gains from trade shift to Portugal. e. some of the gains from trade shift to Spain.