If policymakers in an open economy want to increase the wealth of their citizens, should they seek to increase saving, or to increase investment? Explain
What will be an ideal response?
Policies to increase investment will increase the domestic capital stock. However, this adds nothing to citizens' wealth, unless saving has increased. If saving is fixed, the increase in investment is financed either by foreigners (net capital inflow) or by a diversion of domestic saving from foreign assets to domestic assets (reduced net capital outflow). Policies to increase saving, if effective, will increase domestic wealth, regardless of the level of domestic investment.
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What is the output level predicted by the Cournot model? Discuss this in terms of the different market models that have been surveyed so far
What will be an ideal response?
The existence of absolute advantage
A. implies that there will be no benefits from trade taking place between two nations. B. refers to a situation where one country can produce one particular good with fewer units of resources than the other country. C. fosters the self-sufficiency of the two nations. D. refers to a situation in which one country can produce all goods with fewer units of resources than can another country.