If a Country's P_X/P_Y in Autarky Is Less Than the P_X/P_Y

question 13

Multiple Choice

If a country's P_X/P_Y in autarky is less than the P_X/P_Y on the world market, then this country has a comparative advantage in the __________ good, and, if the country now engages in international trade and moves along its production-possibilities frontier, its
Production of the X good will __________.

• A) Y; increase
• B) Y; decrease
• C) X; decrease
• D) X; increase

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Definitions:

Aggregate Demand Curve

A graph showing the relationship between the total demand for goods and services and the overall price level in the economy, all else being equal.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate reflection of an economy’s size and growth rate.

Aggregate Supply Curve

A graphical representation showing the relationship between the overall price level in an economy and the total output produced by that economy at various price levels.

Price Index

A number that shows the average price of products; changes in a price index over time show changes in the economy’s average price level.