If a Country Has a Comparative Advantage in the Production

question 41

Multiple Choice

If a country has a comparative advantage in the production of all goods, it should:

• A) specialise in the production of goods with the lowest opportunity cost.
• B) specialise in the production of goods with the highest opportunity cost.
• C) specialise in the production of goods with the absolute advantage.
• D) specialise in the production of goods without the absolute advantage.

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Definitions:

Fiscal Authorities

Government bodies responsible for managing a country's economic policy, particularly regarding taxation and government spending.

Monetary Authorities

Institutions responsible for regulating a country's money supply and financial policies, such as central banks.

Inflation Rates

The rate at which the general level of prices for goods and services is rising, eroding purchasing power over time.

Monetarists

Economists who maintain that shifts in the money supply have substantial effects on short-run national output and on the price level across longer time frames.