1. What are the five factors that influence comparative advantage?

2. How can the government use different fiscal policies to [a] lower unemployment and [b] reduce inflation?

3. Some economists believe that creeping inflation cannot be accepted because a gradual increase in prices leads to an ever-rising rate of inflation. Other economists argue that in order to achieve economic growth, some moderate price increases are necessary. Contrast and evaluate these two points of view.

4. Use the concepts of gross investment and net investment to distinguish between an economy that has a rising stock of capital and one that has a falling stock of capital. Explain: “Though net investment can be positive, negative, or zero, it is impossible for gross investment to be less than zero.”