Answer:
C. A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services.
Explanation:
<em>Comparative advantage</em> is simply evaluating the opportunity cost of other benefits or costs, if the country is opting to choose for a specific category of goods for production purposes.
For example, let's say US can produce 20 Television (TV) sets and 50 Air Conditioners in a month. Here, the opportunity cost of producing 1 TV set is 50/20 i.e. 2.5 Air Conditioners. Similarly, the opportunity cost of producing 1 Air Conditioner (AC) is 20/50 i.e. 0.4 TV set. Hence, US should produce Air Conditioners over TV sets as per <em>Comparative Advantage</em> concept.
Take another example, let's say UK can produce 50 Television (TV) sets and 20 Air Conditioners in a month. Hence, the opportunity cost of producing 1 TV set is 20/50 i.e. 0.4 Air Conditioner. On the other hand, the opportunity cost of producing 1 AC is 50/20 i.e. 2.5 TV sets. Thus, UK should produce TV sets over AC's as per <em>Comparative Advantage </em>model.
Hence, US should export AC's to UK and import TV sets from UK to gain from specialization and trade.
<em> In this way nations can gain from specialization and trade by making use of Comparative Advantage theory</em>.
It is to be noted that <em>Absolute Advantage model </em>of Adam Smith is also good as it highlights production of that good by a country, which it can produce in large quantities with fewer resources and minimal time than any other nation in the world. But the <em>Comparative Advantage Model </em>developed by David Ricardo considers opportunity cost and is much more refined than Absolute Advantage Model.
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Answer:
There is something wrong with this question because October to February is not four months, it's five months.
We can calculate this assuming 3 months of 2016 (October, November, December) and 2 months of 2016 (November and December).
- 3 months of 2016 = ($22,400 / 4 months) x 3 months = $16,800
- 2 months of 2016 = ($22,400 / 4 months) x 2 months = $11,200
No option is correct.
Answer:
Answer is option c.
Default Risk and Liquidity Risk
Explanation:
- Default risk - because AAA and BBB differ in credit quality
- Liquidity risk - because BBB could potentially have lower liquidity than AAA bond (more stable and could be more traded)
Answer:
The question is incomplete since the requirements are missing, but I guess that it deals with the bank's ability to create money.
When you deposit money into a bank account, the bank will then lend most of that money to other clients. This is possible due to the money multiplier = 1 / required reserve rate = 1 / 4% = 25
the total increase in money supply = $12,000 x 25 = $300,000
