Author Question: If the United States were to adopt a policy of free trade with European countries and Japan, this ... (Read 76 times)

Alygatorr01285 · **on:** Jun 30, 2018

If the United States were to adopt a policy of free trade with European countries and Japan, this policy would:
a. help the United States and hurt the other countries because the United States has a larger population.
b. help all of the countries involved because every country would have a comparative advantage in the production of some goods.
c. hurt all of the countries involved because all the countries are capable of producing anything that could be produced in one of the other countries.
d. help the United States and hurt the other countries because the United States has more natural resources than the other countries.

Question 2

How is inflation typically measured? What are the different types of inflation? Why is it important to know which type of inflation we may be experiencing?

cloudre37 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

b

Answer to Question 2

Inflation is typically measured by the CPI. The two types of inflation are demand-pull and cost-push. Demand-pull inflation is characterized by too many dollars chasing too few goods and service. Demand-pull inflation is caused by total spending increasing faster than real GDP. Cost-push inflation is caused by anything that increases costs of production. Knowing which type of inflation we may be suffering from is important because each type of inflation requires a different policy prescription to combat.