Practice for Final Part 2- 2025

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Use the historical economic data to answer the question. What type of fiscal policy strategy would be the MOST effective response to the developments highlighted, and what is a potential consequence of such a policy?

• Reducing price levels through expansionary fiscal policy, which will likely increase the deficit
• Increasing demand through contractionary fiscal policy, which will likely increase the deficit.
• Increasing demand through expansionary fiscal policy, which will likely lead to a reduction in GDP.
• Reducing price levels through contractionary fiscal policy, which will likely lead to a reduction in GDP.

Review the chart outlining the income tax rates for 2 countries. Which table describes each country's approach to taxation?

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Japan and Saudi Arabia both produce oil and cell phones and do not trade with each other. The countries are considering specializing in one product or the other and then trading with each other. Would this benefit Japan and Saudi Arabia? Why?

• Specializing and trading would not benefit either country because the opportunity cost of producing cell phones is the same in both countries.
• Specializing and trading would benefit both countries because Japan has a comparative advantage in cell phones and Saudi Arabia has a comparative advantage in oil.
• Specializing and trading would not benefit either country because the opportunity cost of producing oil is the same in both countries.
• Specializing and trading would benefit both countries because Japan has a comparative advantage in oil and Saudi Arabia has a comparative advantage in cell phones.

Which type of investments generally have the HIGHEST potential returns and what is the downside of these investments?

• Shares of stock, which prevent investors from accessing their money for a specified period of time.
• Certificates of deposit, which carry the highest risk that investors will lose their money.
• Shares of stock, which carry the highest risk that investors will lose their money.
• Certificates of deposit, which prevent investors from accessing their money for a specified period of time.

Presuppose that these are the only goods the two countries produce and that the countries have the same level of productive resources. Based on this information and table, how do the production capabilities of the countries compare?

• Country X has both a comparative and absolute advantage in the production of avocados. Country Y has both a comparative and absolute advantage in the production of mangoes.
• Country X has both a comparative and absolute advantage in the production of mangoes. Country Y has both a comparative and absolute advantage in the production of avocados.
• Country X has an absolute advantage in the production of mangoes, but Country Y has a comparative advantage. Country Y has an absolute advantage in the production of avocadoes, but Country Y has a comparative advantage.
• Country X has an absolute advantage in the production of avocadoes, but Country Y has a comparative advantage. Country Y has an absolute advantage in the production of mangoes, but country X has a comparative advantage.

Based on the information, which loan is best for Maribel?

• Loan 1, because it will cost her less money for her loan to be processed.
• Loan 2, because it will cost her less money for her loan to be processed.
• Loan 1, because she will pay less in interest and fees over the life of the loan.
• Loan 2 because she will pay less in interest and fees over the life of the loan.

Which graph represents how the company's announcement will MOST LIKELY affect the global market for diamonds?

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