QUESTION 24
Country X can produce 10 cars or 20 computers per unit of labour, while Country Y can produce 8 cars or 16 computers per unit of labour. How does the concept of absolute advantage best apply to these countries?
A. Country X should focus on producing computers, as it has an absolute advantage in car production.
B. Country Y should specialize in producing cars, as it has an absolute advantage in car production.
C. Both countries should produce cars and computers in equal proportions to maximize efficiency.
D. Both countries should adopt protectionist policies to maintain domestic production levels.
QUESTION 25
In a globalized economy, Country A's currency experiences a significant depreciation against Country B's currency. How might this impact the economies of both countries?
A. Country A may experience increased demand for imports, leading to a trade deficit, while Country B may see a boost in export competitiveness and a trade surplus.
B. Country A may witness a rise in export competitiveness and a trade surplus, while Country B may face reduced export demand and a trade deficit.
C. Both countries may encounter decreased consumer spending and investment, leading to economic contraction and recessionary conditions.
D. Country A may implement capital controls to stabilize its currency, while Country B may pursue aggressive monetary policy to stimulate economic growth.
