Suppose That the United States and Cuba Decide to Open

question 29

Multiple Choice

Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative advantage, ________ will gain from that trade because ________.

• A) both countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs.
• B) neither country; their consumption possibilities will not change.
• C) only the United States; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change.
• D) only Cuba; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change.

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Definitions:

National Income Accounting

A system used by a country to measure the overall economic activity and income generated within its economy over a specific time period.

Saving And Investment

The act of foregoing current consumption to put resources into assets or projects expected to generate future benefits or returns.

Loanable Funds

A term used in economics to describe the market where savers supply funds to borrowers, typically characterized by the interest rate.

Saving

The act of setting aside a portion of current income for future use, which could involve depositing money into bank accounts or investing in financial products.