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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

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BuyFindarrow_forward

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
Chapter 3, Problem 4CQQ
Textbook Problem
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Which goods will a nation typically import?

a. those goods in which the nation has an absolute advantage

b. those goods in which the nation has a comparative advantage

c. those goods in which other nations have an absolute advantage

d. those goods in which other nations have a comparative advantage

To determine
The comparative advantage and import of goods and services.

Explanation of Solution

Option (d):

Gains from trade are based on comparative advantage. A country exports goods and services which have a comparative advantage in and import goods and services that other nations have comparative advantage in. So, option ‘d’ is correct.

Option (a):

Gains from trade are based on comparative advantage of a nation and not based on absolute advantage...

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