Suppose that after specializing according to comparative advantage, a country is trading with another nation that also specializes according to its comparative advantage. Which of the following statements are true for the first country?
i. It enjoys gains from trade.
ii. It must have an absolute advantage in the production of the good it produces.
iii. It is producing at a point beyond its PPF.
A) ii and iii B) i and iii C) i, ii, and iii D) i only E) i and ii
Question 2
The supply of loanable funds is from
A) firms and the government if it has a budget deficit.
B) households and the government if it has a budget deficit.
C) firms and the government if it has a budget surplus.
D) households and the government if it has a budget surplus.
E) households and firms.
Steady State in the Two-Country Model
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