SCENARIO: CHILE AND ARGENTINA

question 55

Multiple Choice

SCENARIO: CHILE AND ARGENTINA
Chile and Argentina each produce jellybeans and peanut butter, using
Labor as their only resource.Each country has 1,000 hours of labor.In
Chile, an hour produces a pound of jellybeans and 2 hours produce a
Pound of peanut butter.In Argentina, an hour produces a pound of
Jellybeans and 3 hours produces a pound of peanut butter.When they do
Not trade with each other, Chile consumes 600 pounds of jellybeans and
200 pounds of peanut butter, and Argentina consumes 400 pounds of
Jellybeans and 200 pounds of peanut butter.
Reference: Ref 2­10
(Scenario: Chile and Argentina) In order for Chile to gain from trade, the
Price of jellybeans must be less than:

• A)2 pounds of peanut butter per pound of jellybeans.
• B)3 pounds of peanut butter per pound of jellybeans.
• C)1/3 pound of peanut butter per pound of jellybeans.
• D)1/2 pound of peanut butter per pound of jellybeans.

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Definitions:

Deposit Expansion Multiplier

The ratio of the amount by which deposits can increase to the original amount of new reserves; it shows how money multiplies in the banking system.

Reserve Ratio

This is the fraction of depositors' balances banks must have on hand as cash.

Discount Rate

The rate of interest applied to loans obtained by commercial banks and other saving organizations from the lending facility of their regional Federal Reserve Bank.

Government Bonds

Long-term debt of the federal government.