George and Michael Can Gain from Exchange

question 394

Multiple Choice

George and Michael can gain from exchange

• A) if each specializes in the production of the good for which he has the lower opportunity cost.
• B) unless they have different opportunity costs.
• C) unless one has an absolute advantage in all goods.
• D) if each specializes in the production of the good for which he has the higher opportunity cost.

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Definitions:

Inflationary Recessions

Uncommon scenarios where an economy experiences both inflation—rising prices—and recession, which is a significant decline in economic activity, simultaneously.

Great Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production.

Economic Theory

A set of principles, models, and concepts used to explain how economies operate and how economic agents interact.

Fiscal Policy

Government strategies to influence an economy’s direction through spending and taxation decisions.