Statements/trade

Question 1

Positive Statement

Answer 1

facts; objective; can be tested; can be true/correct or false/incorrect.

Question 2

Normative Statement

Answer 2

opinions; subjective; can not be tested; can agree or disagree, not correct/right or incorrect/wrong.

Question 3

Absolute advantage

Answer 3

the situation where one country can produce a product using fewer resources than another country

Question 4

Comparative advantage

Answer 4

the situation where one country can produce a product at a lower opportunity cost than other country

Question 5

Five steps when analysing comparative advantages

Answer 5

1. calculate opp.cost
2. draw PPC
3. calculate self sufficiency
4. calculate specialisation
5. draw exchange rate diagram