The Theory of Comparative Advantage Suggests That Nations Should Produce

question 79

Multiple Choice

The theory of comparative advantage suggests that nations should produce a good if they

• A) have the lowest opportunity cost.
• B) have the lowest wages.
• C) have the most resources.
• D) can produce more of the good than any other nation.

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Definitions:

Sovereign Debt

Borrowings issued by a national government in foreign currency or its own currency.

National Governments

The organization that governs a nation, responsible for creating and enforcing laws, managing the economy, and providing public services.

Reserve Currency

A foreign currency held in significant quantities by governments and institutions as part of their foreign exchange reserves.

Financial Crisis

A situation in which the value of financial institutions or assets drops rapidly, leading to a loss of confidence in the financial system and, potentially, bank failures or economic downturns.