Answer:
b. countries can become better off by specializing in what they do best.
Explanation:
Comparative advantage in economics is the ability of an individual or country to produce a specific good or service at a lower opportunity cost better than another individual or country.
The comparative advantage gives a country a stronger sales margin than their competitors as they are able to sell their specific products or render their peculiar services at a lower opportunity cost.
In 1817, David Ricardo who is an english political economist talked about the law of comparative advantage in his book “On the Principles of Political Economy and Taxation."
Also, the principle of comparative advantage asserts that countries can become better off by specializing in what they do best.
This simply means that, any country applying the principle of comparative advantage, would enjoy an increase in output and consequently, a boost in their Gross Domestic Products (GDP).
Answer:
The correct option is B. expand the production possibilities of an economy.
Explanation:
Economic growth can be defined as the increase in an economy's production of economic goods and services, often compared from one period of time to another. It can be measured in any of the following:
- Nominal or real (adjusted for inflation) terms.
- Gross National Product (GNP)
- Gross Domestic Product (GDP), etc.
Contributors to economic growth include:
- Increases in capital goods.
- Increase in labor force.
- Technology.
- Human capital.
In simplest terms therefore, economic growth is used to refer to an increase in the aggregate production in an economy.
Answer:
Country A to specialize in growing corn while country B specializes in making cars
Answer:
All answers are correct except Money Supply
Explanation:
Fiscal policy affects aggregate demand through government spending and taxes. Government may increase taxes to increase revenue or discourage the consumption of a product. On the flipside, they may reduce taxes to stimulate spending, redistribute income, increase aggregate demand among other objectives.
Money supply is a monetary policy and it is used by the central bank to achieve certain objectives (reduce inflation, stimulate growth, increase demand, etc.)
Government spending is a fiscal policy that government uses to achieve a set of objectives (i.e. to supply goods and services that are not provided by the market or private sector – construct bridges, provide health facilities, social programmes for the poor among others).
Taxes – Tax is a fiscal policy tool used by the government to generate revenue, encourage or discourage the consumption of certain products or affect aggregate demand through income redistribution.
Trade policy could be in the form taxes (i.e. tariffs, import duties, custom duties among others). Trade policy is a fiscal policy as government can use it to control aggregate demand by placing embargo on the importation of certain products to reduce the demand of such products in the local economy.
