ECO 561 Final Exam Guide Latest/ECO 561 Final Exam Guide Latest/ECO 561 Final Exam Guide Latest

1.  In the theory of comparative advantage, a good should be produced in that nation where: 

the production possibilities line lies further to the right than the trading possibilities line
its cost is least in terms of alternative goods that might otherwise be produced
its absolute cost in terms of real resources used is least
its absolute money cost of production is least

2. The simple circular flow model shows that: 

businesses are on the selling side of both product and resource markets.
businesses are on the buying side of the product market and on the selling side of the resource market.
households are on the selling side of the resource market and on the buying side of the product market.
households are on the buying side of both product and resource markets.

3. Suppose you have a limited money income and you are purchasing products A and B, whose prices happen to be the same. To maximize your utility, you should purchase A and B in such amounts that: 

their total utilities are the same
their marginal and total utilities are proportionate
the income and substitution effects associated with each are equal

their marginal utilities are the same

4. Contractionary fiscal policy is so named because it: 

is expressly designed to expand real GDP
involves a contraction of the nation’s money supply