Which of the Following Is True

question 44

Multiple Choice

Which of the following is true?

• A)International trade makes it possible for a country's consumption possibilities to exceed its production possibilities.
• B)International trade requires that a country's production possibilities exceed its consumption possibilities.
• C)A country's production possibilities always equal its consumption possibilities.
• D)A country's consumption possibilities can never equal its production possibilities because of leakages in the system.
• E)As long as there is full employment of resources, a country's production possibilities will exceed its consumption possibilities even with trade.

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Definitions:

Classical Theory

An economic theory that emphasizes the importance of free markets, competition, and the belief that markets, through the forces of supply and demand, will naturally regulate the economy.

Employment

The condition of having a paid job; the total number of people currently employed in the economy.

Interest Rate Effect

The impact that changes in the interest rate have on consumer spending and investment due to the cost of borrowing money.

Real Wealth Effect

The change in consumption levels caused by a change in purchasing power, often due to inflation or deflation.