A nation must have an absolute advantage in order to have a comparative advantage in producing a good or service.
Indicate whether the statement is true or false
Question 2 - The empirical data indicate that in the short run exchange rates are much more variable than inflation differentials.
Indicate whether the statement is true or false
Question 3 - An import tariff will cause the relative demand for ________ to ________ and the relative supply for ________ to ________.
A) imports; decrease; imports; increase
B) imports; increase; imports; decrease
C) exports; increase; exports; decrease
D) exports; decrease; exports; increase
E) exports; increase; imports; decrease
Question 4 - The balance of payments has become a central issue for the United States because
A) when the balance of payments is not balanced, society is unbalanced.
B) the U.S. economy cannot grow when the balance of payments is in deficit.
C) the U.S. has run huge trade deficits in every year since 1982.
D) the U.S. never experienced a surplus in its balance of payments.
E) the U.S. once ran a large trade surplus of about 40 billion.
Question 5 - Customs unions and free trade areas are identical in the manner in which member countries treat imports from nonmember countries.
Indicate whether the statement is true or false
Question 6 - Refer to the figure above. This country has comparative advantage in good
A) S.
B) T.
C) Y.
D) Z.
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