Suppose that country A pegs its currency to the currency of country B. Which of the following will NOT be a benefit of this arrangement to country A?
A) lower transactions costs for A to conduct international trade with country B
B) increased capital flows between the two countries because of increased certainty of future exchange rates
C) decreased migration between the two countries because of increased certainty of future exchange rates
D) lower costs of economic transactions costs between the two countries, leading to welfare gains for country A
Ans: C) decreased migration between the two countries because of increased certainty of future exchange rates
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If Irene can make either four chairs or one table in an hour and Greg can make either three chairs or two tables in an hour then
A) Irene has the absolute advantage in the production of chairs. B) Irene has the comparative advantage in the production of tables. C) Greg has the absolute advantage in the production of chairs. D) Greg has the comparative advantage in the production of chairs.
Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Suppose Country B's population of workers increased to 600. We can say:
A. Country B has no need to trade now. B. Country B now possesses the absolute advantage in the production of both goods. C. Country B now has the comparative advantage in iPod production. D. Country B now possesses the absolute advantage in tablets only.