When a Country Specializes and Trades with Other Countries, It

question 34

Multiple Choice

When a country specializes and trades with other countries, it is most likely that it specializes in goods for which

• A) it has a comparative advantage.
• B) it has an absolute advantage.
• C) it has no advantage.
• D) are very costly to produce.

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Definitions:

Market System

An economic system where decisions regarding investment, production, and distribution are based on supply and demand.

Real Income

The income of an individual or group after adjusting for inflation, reflecting the actual purchasing power of the income.

Government Expenditures

Federal, state, and local government outlays for goods and services, including transfer payments.

Rational Expectations

The economic theory that when making decisions, individuals take into account all available information, including their understanding and predictions of the future.