In the Theory of Comparative Advantage, a Good Should Be

question 37

Multiple Choice

In the theory of comparative advantage, a good should be produced in that nation where

• A) the production possibilities line lies further to the right than the trading possibilities line.
• B) its cost is least in terms of alternative goods that might otherwise be produced.
• C) its absolute cost in terms of real resources used is least.
• D) its absolute money cost of production is least.

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Definitions:

Expected Inflation

The rate at which consumers, businesses, and investors expect prices to rise over a future period.

Long-run Phillips Curve

The long-run Phillips Curve is an economic concept that illustrates the relationship between inflation and unemployment, suggesting that in the long run there is no trade-off between these two factors.

Potential Output

The upper limit of real GDP sustainable over an extended period without inflating the inflation rate.

Phillips Curve

A graphical representation showing an inverse relationship between the rate of unemployment and the rate of inflation in an economy.