The Figure Given Below Depicts the Macroeconomic Equilibrium in a Country.?Figure

question 24

Multiple Choice

The figure given below depicts the macroeconomic equilibrium in a country.?Figure 11.3

-Refer to Figure 11.3. Assume that the increase in aggregate demand from AD₁ to AD₂ was the result of government spending that was financed by borrowing. Assuming that the Ricardian equivalence holds and people expect taxes to rise in future, the equilibrium income will be:

• A) $800.
• B) less than $500.
• C) more than $800.
• D) less than $700.
• E) $700.

Understand the basic concept of comparative advantage and how it differs from absolute advantage.

Identify conditions under which countries should specialize in the production of certain goods and engage in trade.

Calculate opportunity cost and understand its role in determining comparative advantage.

Recognize the benefits of specialization and trade for countries involved.

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Definitions:

Recycling

The process of converting waste materials into new products to prevent waste of potentially useful materials.

Risk Management

The process of identifying, assessing, and prioritizing risks followed by coordinated application of resources to minimize or control their impact.

Environmentally Related Activities

Actions or operations by organizations or individuals that have a direct impact on the natural environment.

Trade-Offs

Decisions involving a sacrifice of one goal or value in order to obtain or prioritize another, often in the context of limited resources.