Is it possible for a country to have a comparative advantage in everything?

July 7, 2024 No Comments

A: In international trade, it is not possible for a country to have a comparative advantage in the production of all goods. One country can, however, have an absolute advantage in producing all goods. In economics, the difference between a comparative advantage and an absolute

Is Mexico an emerging market economy?

July 7, 2024 No Comments

A: Mexico meets all the criteria of an emerging market economy. The country’s gross domestic product, or GDP, per capita beats most of its peers in the developing world but falls short of the threshold required for classification as a developed country. The story with

Is real GDP a better index of economic performance than GDP?

July 7, 2024 No Comments

A: Real GDP is a much better index for expressing the output of an economy, as it takes into account the fluctuating value of goods and services when expressed in monetary terms. It therefore gives economists a better idea of the total national output of

Is the consumer price index (CPI) the best measure of inflation?

July 7, 2024 No Comments

A: The consumer price index (CPI) measures food; beverages; housing; apparel; transportation; medical care; recreation; education and communication; and other goods and services. It is one of the most-used economic indicators to measure inflation in the United States, as it calculates the change in cost

Is the retail sector also affected by seasonal factors?

July 7, 2024 No Comments

A: Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the fourth quarter, or October through December, and peak at Christmas. According to the Census Bureau’s Monthly Retail Trade Report, the most seasonal retail markets are

Is the substitution effect negative for consumers?

July 7, 2024 No Comments

A: The substitution effect is both positive and negative for consumers. It is positive for consumers because it means that they can afford to keep consuming products in a category even if their incomes decline or some products rise in price. It is also negative

Is the United States a Market Economy or a Mixed Economy?

July 7, 2024 No Comments

A: The United States has a mixed economy. It works according to an economic system that features characteristics of both capitalism and socialism. A mixed economic system protects private property and allows a level of economic freedom in the use of capital, but also allows for governments to intervene

Is there a correlation between inflation and house prices?

July 7, 2024 No Comments

A: There is a correlation between inflation and house prices. In fact, there are correlations between inflation and any good with a limited supply. To illustrate, consider an economy that has a money supply of only $10 and five identical houses in the whole economy. Each

Marginal propensity to Consume (MPC) Vs. Save (MPS)

July 7, 2024 No Comments

A: Historically, because people in the United States have shown a higher propensity to consume, this is likely the more important factor than the propensity to save. Consumer demand and consumption drive the U.S. economy. When consumers have a greater amount of extra income, they

Market operation and its effect on Money Supply

July 7, 2024 No Comments

A: The open market operations conducted by the Federal Reserve affect the money supply of an economy through the buying and selling of government securities. When the Federal Reserve purchases government securities on the open market, it increases the reserves of commercial banks and allows them

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