Suppose There Are Two Countries,Freedonia and Sylvania,which Have Identical Amounts

question 83

Multiple Choice

Suppose there are two countries,Freedonia and Sylvania,which have identical amounts of resources,identical technologies,and identical populations.Both produce two types of goods,consumer goods and capital goods,and they both always operate on their production possibilities frontiers.The only difference is that this year Freedonia chooses to produce relatively more consumer goods than Sylvania.What will happen as a result

• A)Freedonia will have a higher living standard this year but will grow slower than Sylvania.
• B)Freedonia will have a higher living standard this year and will grow faster than Sylvania.
• C)Sylvania will have a higher living standard this year but will grow slower than Freedonia.
• D)Sylvania will have a higher living standard this year and will grow faster than Freedonia.

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Definitions:

Aggregate Supply Curve

A graphical representation showing the total quantity of goods and services that producers are willing and able to supply at different price levels in an economy.

Supply Shocks

Unexpected events that affect aggregate supply, sometimes only temporarily.

Inward

Refers to movements or directions towards the inside or center of something.

Expansionary Gap

A situation where the actual output of an economy exceeds its potential output at full employment, often leading to inflation.