Assume a Two-Commodity,two-Country World

question 178

Multiple Choice

Assume a two-commodity,two-country world.Then assume that the U.S.has a comparative advantage in the production of computers and Mexico has a comparative advantage in the production of oil.Which of the following statements is true?

• A)U.S.consumption of oil will decrease after the introduction of trade.
• B)U.S.consumption of oil will increase after the introduction of trade.
• C)Mexico's consumption of oil will decrease after the introduction of trade.
• D)All of the statements are true.

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Definitions:

Constitutional Amendment

A formal change or addition proposed or made to a constitution, which alters its content and legal ordering.

Balanced Budget

A financial plan whereby revenues and expenditures are equal, resulting in no deficit for the given period.

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The fluctuations in economic activity that an economy experiences over a period of time, typically characterized by periods of boom and recession.

Balanced Budget Rule

A fiscal policy regulation requiring that a government's spending does not exceed its income in a given period.