If Country X Can Produce a Unit of Good 1

question 42

Multiple Choice

If country X can produce a unit of good 1 with fewer resources than can country Y,it is correct to state that country X

• A)has a comparative advantage in producing good 1.
• B)has an absolute advantage in producing good 1.
• C)will export good 1 to country Y.
• D)will not produce good 1.

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Definitions:

Equilibrium GDP

The level of Gross Domestic Product at which total demand for goods and services equals total supply, resulting in stable prices and employment.

Full Employment GDP

The maximum level of production an economy can sustain while keeping unemployment at its natural or non-accelerating inflation rate of unemployment (NAIRU).

Multiplier

In economics, a factor by which a change in spending results in an amplified change in national income and output.

Inflationary Gap

The difference between the actual output of an economy and the output it would produce without inflation, indicating an overheated economy.