The Country of Rhozundia Is Blessed with Rich Copper Deposits

question 10

Multiple Choice

The Country of Rhozundia is blessed with rich copper deposits. The cost of copper produced (relative to the cost of widgets produced) is therefore very low. From this information we know that

• A) Rhozundia has a comparative advantage in copper.
• B) Rhozundia should import copper and export widgets.
• C) Rhozundia should export both widgets and copper.
• D) Rhozundia should invest in more widget production.
• E) Rhozundia may or may not have a comparative advantage in copper.

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Definitions:

Reserves Interest

Interest earned on reserves held by banks at the central bank, influencing monetary policy and banking operations.

Government Securities

Financial instruments issued by a government to raise funds from investors, typically featuring lower risk and fixed interest payments.

Discount Rate

The interest rate charged by central banks to commercial banks for short-term loans.

Expansionary policy

Economic policies aimed at increasing the supply of money or reducing taxation to stimulate economic growth, typically undertaken during a recession.