Questions and Answers of Economics An Introduction To Traditional

Discuss the effectiveness of each tool.
What should the Federal Reserve do according to conservatives' economists?
What should the Federal Reserve do according to progressive economists?
Describe some monetary policy decisions under the Bush administration.
What are the conservative arguments supporting Bush’s monetary policies? Progressive criticisms?
How does the usual pattern of American trade over the cycle tend to reduce demand for American products?
How does a trade surplus affect aggregate expenditures? Explain. How does a trade deficit affect aggregate expenditures? Explain.
Describe why the trade deficit rises further in economic expansions but declines in contractions.
How does the high price of raw materials in an expansion hurt the American economy?
How does international trade transmit expansions and recessions from one country to another?
How does international investment transmit expansions and recessions from one country to another?
How does international finance transmit expansions and recessions from one country to another?
Explain why foreign investment is subject to wider fluctuations than domestic investment.
What is the impact of changes in patterns of trade, investment and finance on smaller countries? Larger countries?
What explains the differences in the impact on large and small economies?
How are business cycles transmitted from one country to another? Explain.
What is the “process of globalization”? What distinguishes the corporate-led globalization process?
How do progressive economists view corporate-led globalization?
What are indicators used to measure the positive aspects of globalization?
What enabled growth in countries due to the process of globalization?
Examine the major conflicts emerging from globalization, such as those associated with employee–employer interests, insufficient trust, and environmental destruction.
What is the difference between a tariff and a quota? Why would advocates of free trade see these policy tools as reducing consumer welfare?
Demonstrate using a PPF graph why both countries can be made better off by specialization and trade.
How does the Heckscher-Ohlin model challenge the traditional model of comparative advantage? What are problems with both models?
What would be arguments used to justify barriers to free trade, such as tariffs and quotas?
Describe how two countries might arrive at mutually agreeable terms of trade.
How does the Prebisch-Singer hypothesis challenge the comparative advantage model of trade?
Explain why would both countries be better off specializing and trading even if one country produces more of all goods.
Explain the need to go beyond the analysis of static comparative advantage according to modifications of the assumptions, paying particular attention to a. Transportation costsb. Factor
What are the assumptions behind the simple static theory of comparative advantage?
In the real world, what might interfere with the results predicted by the model?
Following are the production possibilities curves for the fictional nations of Bergsakeria and Solbergia showing their respective capacities for producing gizmos (G) and widgets (W). Use this
Explain the possible policy implications for the need to develop along the lines of South Korea rather than Chile. Pay particular attention to (a) free trade versus protection, (b)industry, and (c)
Counter to the predictions of static comparative advantage, explain why advanced nations trade mostly among themselves (along with the select new areas that become part of their strategic alliances
Why do Europe and the U.S. both want to maintain agricultural subsidies? Why do developing countries argue the U.S. and Europe should drop the subsidies?
Why might the product cycle provide an explanation for export success and then failure, while static comparative advantage fails to comprehend the evolutionary aspects of trade?
What is the WTO? Is it effective in enforcing trade policies? Why or why not?
Why may developing nations find it advantageous to protect their new technology industries and provide infrastructure such as roads, education, and health services to stimulate human capital when
Why have South Korea, Taiwan, and Singapore been so successful at technologically advanced processes and products when static comparative advantage indicated that they should have concentrated on
What are measures used to compare economic outcomes of developed and less developed countries?
Does the average American have a net benefit or a net loss from wars conducted to hold neocolonies?
Why is underdevelopment based on several measures instead of just one?
Do any corporations benefit directly or indirectly from such wars?
Define underdeveloped country, colony, neocolony, and surplus of a country.
How do the native elite of underdeveloped countries use the surplus?
What are the roles played by trade, investment, and finance in extracting the surplus from an underdeveloped country and sending it abroad?
What are some obstacles to development? Describe how the obstacles impact some of the specific measures discussed in questions 1 and 2.Data from q 1 and q 2What are measures used to compare economic
What conditions for a perfectly competitive market are violated by oligopolies? Monopolistic competition?
Compare and contrast oligopolies and monopolistic competition. What is an advantage for a firm operating in each market structure? Disadvantage?
Describe how brand names are legally protected. How does this resemble a monopoly?
Explain how product differentiation leads to competing brands.
Explain the link of advertising and brand names (product differentiation) in maintaining profits for firms in monopolistic competition.
Demonstrate graphically what happens to profits if more advertising results in more consumers. Now demonstrate what happens to profit if more advertising raises the costs to the firm.
Explain why pricing decisions of a firm in an oligopolistic market depend on decisions of other firms. How is this different from decisions of firms in perfectly competitive markets?
Compare and contrast explicit and implicit collusion. What are examples of pricing models for explicit and implicit collusion? Explain.
What is the definition of a market failure? Why do they occur?
Is free riding always something that is “bad”? As part of your answer, define free riding and give examples.
Early in the chapter, it was suggested that there is a market failure if ice cream consumers are not aware of the high fat content of ice cream. Suppose that the government requires all ice cream
What is it about goods that are not subject to the exclusion principle and non-rival consumption that lead to free riding? Explain.
What are the two main attributes that distinguish public goods from private goods? What conditions must hold for optimal allocation of public goods?
Define allocative efficiency. What are two complications that arise when applying the concept of allocative efficiency?
Identify the public good attributes of each of the following. Also, explain how (and if) these goods could be efficiently provided by the private sector.a. lighthouse b. an income redistribution
What are some methods that can be used to fund public goods?
The national parks received millions of visitors annually, and there is often a bumper-tobumper traffic jam on the roads throughout the parks. Do you think this would be true if the national parks
Is the distinction between public and private goods always clear? Explain and give examples.
What policies can be used to internalize externalities? Draw diagrams to illustrate your answer.
Explain how application of the Coase theorem would make pollution taxes unnecessary.
Suppose that a factory currently dumps waste into the river. Explain how taxes could be used to solve this problem.
Do you think assigning private property rights would get rid of all pollution? Explain.
Define the benefits-received and the ability-to-pay principles of taxation. How do these principles relate to tax efficiency and tax equity? What are earmarked taxes?
What might be some problems in assigning private property rights?
In many states, property taxes are earmarked for public schools. There is the perennial argument that property owners who do not have children should pay less or even be exempt from property taxes.
What are transactions costs and how do they make the application of the Coase theorem more difficult?
Many states have policies that tuition at public universities is set at a fixed fraction—often 20 or 25 percent—of the state’s cost of providing the education. Is this a reasonable program? Why
What is a business cycle? What is an expansion, and what is a contraction? How are they measured?
When and where did the modern business cycle begin?
Who loses from recessions and depressions?
What do employees lose?
What do corporations lose?
Does the official unemployment rate tell the whole story about how much unemployment exists?
Describe the “costs” of recessions and depressions.What other points must be considered?
Were there recessions or expansions in pre-capitalist societies? Explain.
What is the largest recession of the twentieth century? What were some of its most significant effects? How did this recession differ from other recessions that followed?
Explain how and why money goes from businesses to households and how and why money goes from households to businesses.
What agency tracks flows of dollars and production?
What are some “costs” not captured by GDP?
Explain how demand and supply flows between businesses and households.
What are some measures listed under national income?
What goods and services are not captured by GDP?
How is GDP measured?
How is GDP calculated? How is GNP calculated?
What is national income used for? How does this correspond to expenditures and GDP?
How is national income calculated from GNP?
What are the components of expenditures? Describe each one in detail. What is the difference between gross and net expenditures?
What are the sources of income from production? What are other sources of income to households?
What does Say’s law mean? Why can’t there ever be a lack of demand in the aggregate?
Describe the process that keeps aggregate supply and demand equal.
What are three main characteristics of the capitalist economy that make possible cycles of boom and bust?
How do these cycles violate Say’s law? What would a conservative economist say about how the economy readjusts? Why?
If Say’s law holds, should the government try to smooth the effects of a boom and bust? Why or why not?

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