Suppose the World Economy Is Composed of Just Two Countries

question 26

Multiple Choice

Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs below. Refer to the graphs and information above. If Italy and Greece should open up trade with each other, which of the following terms of trade is mutually beneficial?

• A) 1 ton of chemicals = 1 ton of steel
• B) 2 tons of chemicals = 1 ton of steel
• C) 5 tons of chemicals = 2 tons of steel
• D) 9 tons of chemicals = 5 tons of steel

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Definitions:

Certify

To officially recognize, verify, or declare something as true, accurate, or in compliance with certain standards.

Sufficient Funds

Availability of enough money or resources to meet financial obligations or complete transactions.

Certificate Of Deposit

A document whereby a bank promises to pay a payee a certain amount of money at a future time.

Promise

A declaration or assurance that one will do something or that a particular thing will happen.