Given the Following Ricardo-Type Table Showing the Amount of Labor

question 12

Multiple Choice

Given the following Ricardo-type table showing the amount of labor input required to produce one unit of output of each of the two goods in each of the two countries:
$\begin{array}{lcc} &\underline{\text { Shirts}} &\underline{\text { Machines }}\\\text { France } & 3 \text { days } & 5 \text { days } \\\text { Germany } & 2 \text { days } & 4 \text { days }\end{array}$
France has an absolute advantage in __________ and a comparative advantage in __________.

• A) both goods; machines
• B) both goods; shirts
• C) neither good; machines
• D) neither good; shirts

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Definitions:

Real Interest Rate

The real interest rate is the interest rate adjusted for inflation, representing the true cost of borrowing and the true yield for savers.

Nominal Return

The rate of return on an investment without adjusting for inflation.

Tax Rate

The tax rate is the percentage at which an individual or corporation is taxed by the government on income or property.

Inflation Rate

The percentage increase in the general level of prices for goods and services in an economy over a period of time, typically measured on a yearly basis.