- Motorcycles Automobiles Country Y 75 OR 40 30. The table above shows the quantity of motorcycles and automobiles produced by two countries that use the same amount of resources. Which of the following is true? (A) Country X has an absolute and comparative advantage in the production of motorcycles. (B) Country X has an absolute and comparative advantage in the production of both goods. (C) Neither country has a comparative advantage in the production of motorcycles. (D) Country Y has an absolute and comparative advantage in the production of automobiles. (E) Country Y has an absolute and comparative advantage in the production of motorcycles. 31. Which of the following is an example of how the consumer price index (CPI) exhibits bias in its estimates of changes in the cost of living? (A) Energy prices have a higher impact on ination than other input costs do. (B) New products are always overrepresented in the CPI. (C) The CPI assigns greater weight to measures of welfare than it does to economic activity. (D) Product improvements are not always fully reected in the calculation of the CPI. (E) The CPI adjusts for the substitution of less expensive goods by consumers. CAPCISIVE goods by COLDSUICID. 32. Fred Jones withdraws $1,000 in cash from his savings account. What immediate effect does this transaction have on the monetary aggregate measures of M1 and M2 ? M1 M2 (A) Increases Decreases B) Increases No change (C) Decreases No change (D) No change Decreases (E) No change No change33. Which of the following is true about inflationary expectations? (A) The actual unemployment rate equals the natural rate of unemployment if the actual inflation rate exceeds the expected inflation rate. (B) The actual unemployment rate equals the natural rate of unemployment when wages fully adjust to expected inflation. (C) Expectations are always correct in the short run. (D) The actual inflation rate is always equal to the expected inflation rate because of labor contracts. (E) The natural rate of unemployment equals the inflation rate when the actual inflation rate equals the expected inflation rate. 34. Which of the following transactions is included in the financial account of Country X's balance of payments accounts? (A) A firm in Country X sells robots to a firm in Country A. (B) Country X sends financial aid to Country B. (C) An individual in Country X receives dividend payments from a firm in Country C. (D) An individual in Country X sends money monthly to family members in Country D. (E) An individual in Country X buys new government bonds issued by Country E. 35. Assume a country's government increases taxes and its central bank decreases the money supply. The actions will result in an increase in which of the following in the short run? (A) Aggregate demand (B) Aggregate supply (C) Investment spending (D) Unemployment (E) Inflation36. When there is excess demand in the loanable funds market, which of the following will occur? (A) National savings will exceed investment spending. (B) The economy will remain at full employment. (C) Real interest rates will increase. (D) An inationary gap will exist. (E) The money supply will increase