When Each Country Specializes in Producing the Good for Which

question 61

Multiple Choice

When each country specializes in producing the good for which it has a comparative advantage:

• A) both countries may benefit.
• B) both countries always enjoy equal gains from trade.
• C) the country that is bigger will gain more surplus.
• D) the country with the weaker economy will gain more surplus.

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Definitions:

Quarterly Compounding

The process of calculating interest and adding it to the principal sum of a loan or deposit on a quarterly basis.

Effective Rate

The interest rate on a loan or investment, adjusted for the effect of compounding over a given period.

Compounded Quarterly

Generating interest on both the initial principal and previously earned interest every three months.

Annual Inflation Rate

The percentage increase in the price of goods and services over a one-year period, reflecting the decreasing purchasing power of a currency.