The Law of Comparative Advantage Indicates That

question 222

Multiple Choice

The law of comparative advantage indicates that

• A) a group of people will reduce their output when each good or service is supplied by the low opportunity cost producer.
• B) trading partners lose when they can acquire a good through trade cheaper than they can produce it.
• C) trade is most effective when people trade only among those in their own nation.
• D) a group of people can increase their output when each good or service is supplied by the low opportunity cost producer.

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Definitions:

Aggregate Demand

The total demand for all goods and services within a particular market.

Wealth Effect

The wealth effect is the change in consumer spending and economic behavior resulting from changes in perceived wealth, typically due to asset price variations.

Aggregate-Demand Curve

A curve that represents the total demand for all goods and services in an economy at various price levels.

Liquidity Preference Theory

is the hypothesis that investors prefer to have liquid rather than illiquid assets and will demand higher yields for longer-term securities that are less liquid.