Suppose that in 2015 the chain-weighted price index for GDP in Estonia is 220 and the chain-weighted price index in Lithuania is 160. In 2016 the price index in Estonia is 242 and the price index in Lithuania is 180. You could conclude that
A) Estonia's rate of inflation is higher than Lithuania's.
B) Lithuania is a more expensive place to live than Estonia.
C) Estonia is a more expensive place to live than Lithuania.
D) Lithuania's rate of inflation is higher than Estonia's.
Question 2
Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 27 per day. If Atlantis produces only kayaks, it can make 18 per day.
If Pacifica produces only surfboards, it can make 32 per day. If Pacifica produces only kayaks, it can make 24 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks.
A) Pacifica; Atlantis B) Atlantis; Atlantis
C) Atlantis; Pacifica D) No trade will occur.
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