Reference: Ref 2-9 (Figure: Countries a & B) Refer to the Figure

question 65

Multiple Choice

Reference: Ref 2-9 (Figure: Countries A & B) Refer to the figure regarding countries A &B. Assume that each country begins by allocating half its labor force to the production of each good. Through trade with each other, each country could increase its consumption of both goods if Country A moved part of its labor force to the production of Good _____ and Country B moved part of its labor force to the production of Good _____.B. If each country allocated half of its labor force to the production of each good before trade and were to then each specialize in their comparative advantage and allocate 75 percent of its labor force to the production of that good, world production of Good X would change by _____ and the production of Good Y by _____.

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

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Definitions:

Aggregate Demand Curve

A visual diagram that illustrates the connection between the total price level within an economy and the aggregate demand for products and services at that specific price level.

Price Level

The median price level across all goods and services offered in the economic landscape.

Aggregate Supply Curve

A graph that shows the relationship between the overall price level in an economy and the total output (goods and services) that producers are willing to supply.

Aggregate Demand

The total demand for all goods and services in an economy at a given overall price level and in a given time period.