Table 3-7 Assume That Japan and Korea Can Switch Between Producing Cars

question 207

Multiple Choice

Table 3-7
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.

-Refer to Table 3-7.Japan and Korea would not be able to gain from trade if Korea's opportunity cost of one car changed to

• A) 1/5 airplane.
• B) 1/3 airplane.
• C) 3 airplanes.
• D) 5 airplanes.

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Definitions:

Effective Annual Rate

The yield on a loan or investment taking into account the impact of compounding throughout a year.

Compounded

In finance, referring to the process where interest is calculated on the initial principal and also on the accumulated interest from previous periods.

Stated Interest

The annual interest rate declared on a financial instrument, such as a loan or bond, not accounting for compounding or fees.

Pure Discount Loan

A loan where the borrower receives an amount less than the principal value and repays the principal amount at maturity with no additional interest.