Table 3-6 -Refer to Table 3-6.Denmark and Italy Trade According to the Trade

question 15

Multiple Choice

Table 3-6

-Refer to Table 3-6.Denmark and Italy trade according to the principle of comparative advantage.If the international price of bread is 2.5 units of cheese for 1 unit of bread,what is the gain from trade to Denmark per unit of bread traded

• A)0.5 units of cheese
• B)1.5 unit of cheese
• C)2.0 units of cheese
• D)2.5 units of cheese

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Definitions:

Actual Output

Actual output refers to the real GDP or the total value of all goods and services produced in an economy at a given time, contrasting with potential output.

Expected Price Level

The anticipation or forecast of future prices across an economy, affecting consumer and business decisions.

Long-Term Contracts

Agreements that extend over a significant period of time, often involving commitments to buy or sell goods or services or to provide employment.

Recessionary Gaps

Situations where an economy's actual output is less than its potential output, often characterized by unemployment and underutilized resources.