Second Attempt Competency 5
What is the fundamental basis for trade among nations?
Comparative Advantage
In the economy, goods and services are purchased by
Households, firms, and the government
Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in
Mexican GDP, but not US GDP
Which of the following is included in the calculation of GDP?
The purchase of tutoring services from a tutor who holds citizenship outside the country but resides within the country.
When the price falls from P2 to P1 producer surplus
decreases by an amount equal A+B
Gross domestic product measures
income and expenditures
The term economists use to describe a situation in which the economy's overall price level is rising is
inflation
In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily,
market prices
The particular price that results in quantity supplied being equal to quantity demanded is the best price because it
maximizes the combined welfare of buyers and sellers.
When the demand for a food increases and the supply of the good remains unchanged, consumer surplus
may increase, decrease, or remain unchanged.
Assume, for Vietnam, that the domestic price of textiles without international trade is higher than the world price of textiles. This suggests that, in the production of textiles,
other countries have a comparative advantage over Vietnam and Vietnam will import textiles.
A recession has traditionally been defined as a period during which
real GDP declines for two consecutive quarters
When the nation of Duxembourg allows trade and becomes an importer of software,
residents of Duxembourg who produce software become worse off; residents of Duxembourg who buy software become better off; and the economic well-being of Duxembourg rises.
A supply curve can be used to measure producer surplus because it reflects
sellers' costs.
Suppose Brazil has an absolute advantage over other countries in producing almonds, but other countries have a comparative advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil
will import almonds
If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is
zero