2019 Macro Set 2 FRQ # 3
Comparative Advantage
Comparative Advantage
i) On the curve is attainable and efficient - E is efficient.
ii) I is inefficient as it is inside the curve, usually the College Board refers to anything inside the curve as unemployment, recession or idle resources. All are inefficient.
iii) Outside the curve is unattainable as society doesn't have the resources to achieve that point.
c) Capital Formation (the production of capital goods - machinery, equipment, factories) are thought of as future goods. To produce more Capital goods implies that society will be able to produce more in the future.
More Capital Goods = More Long Run Growth.
Less Capital Goods = Less Growth
Know and understand this now as you will see it again.
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