Table 7-6 Production and

question 164

Multiple Choice

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 70 belts are traded,how many swords will Estonia gain compared to the "without trade" numbers?

• A)5
• B)45
• C)100
• D)105

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Definitions:

Price Remains The Same

A condition where the cost of a good or service does not change over a period of time.

Substitution Bias

Substitution bias occurs in inflation measurement and refers to the tendency of consumers to change their purchasing habits away from goods that have increased in price to cheaper alternatives, which is not always fully captured by price indexes.

CPI

The Consumer Price Index, which measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Consumer Substitution

The tendency of consumers to switch from one good to another in response to changes in relative prices, keeping their level of satisfaction or utility constant.