Questions and Answers of Economics Today The Macro View

LO3 15. How do nations expect nationalization of basic industries to foster economic growth?
LO2 14. Why do economists put so much emphasis on entrepreneurship? How can poor nations encourage it?
LO3 13. How might Bolivia match China’s investment rate? (See Table 37.5.)
LO3 12. Would you invest in Cambodia or Kenya on the basis of the information in Figure 37.7?
LO3 11. Can poor nations develop without substantial increases in agricultural productivity? (See Figure 37.4.) How?
LO3 10. How does microfi nance alter prospects for economic growth? The distribution of political power?
LO3 9. Could a nation reorder Rostow’s fi ve stages of development and still grow? Explain.
LO3 8. Identify “inequality traps” that might inhibit economic growth.
LO3 7. How do unequal rights for women affect economic growth?
LO3 4. Why are incomes so much more unequal in poor nations than in developed ones? (See World View, p. 758.) LO1 5. How do more children per family either restrain or expand income-earning
LO1 3. If a poor nation must choose between building an airport, some schools, or a steel plant, which one should it choose? Why?
LO2 2. If you had only $14 to spend per day (the U.S. poverty threshold), how would you spend it? What if you had only $2 a day (the World Bank “severe poverty” threshold)?
1. Why should Americans care about extreme poverty in Haiti, Ethiopia, or Bangladesh?
LO3. How global poverty can be reduced.
LO2. How many people in the world are poor.
LO1. How U.S. and global poverty are defi ned.
10. Who will gain and who will lose if China revalues the yuan? LO3
9. Is a stronger dollar good or bad for America? Explain. LO3
8. How would each of these events affect the supply or demand for Japanese yen? LO1 (a) Stronger U.S. economic growth. (b) A decline in Japanese interest rates. (c) Higher inflation in the USA.
7. If a nation’s currency depreciates, are the reduced export prices that result “unfair”? LO3
6. In the World View on page 722, who is Farshad Shahabadi referring to as “everyone else”? LO1
5. In what sense do fixed exchange rates permit a country to “export its inflation”? LO1
4. Under what conditions would a country welcome a balance-of-payments deficit? When would it not want a deficit? LO3
3. How would rapid inflation in Canada alter our demand for travel to Canada and for Canadian imports? Does it make any difference whether the exchange rate between Canadian and U.S. dollars is fixed
2. How do changes in the foreign value of the U.S. dollar affect foreign enrollments at U.S. colleges? LO3
1. Why would a decline in the value of the dollar prompt foreign manufacturers such as BMW to build production plants in the United States? LO3
LO3. How changes in exchange rates affect prices, output, and trade flows.
LO2. How exchange rates are established.
LO1. The sources of foreign-exchange demand and supply.
10. Which consumers benefited from the dumping cases mentioned in the World View on page 705? LO3
9. Who pays for sugar quotas? (See News, page 710.) How could the quotas be eliminated? LO3
8. What is the “bright future” referred to in the News on page 703? How do wine imports affect it? LO3
7. On the basis of News on page 713, how do U.S. furniture manufacturers feel about NAFTA? How about farmers? LO3
6. Domestic producers often base their claim for import protection on the fact that workers in country X are paid substandard wages. Is this a valid argument for protection? LO1
5. Suppose we refused to sell goods to any country that reduced or halted its exports to us. Who would benefit and who would lose from such retaliation? Can you suggest alternative ways to ensure
4. How does international trade restrain the price behavior of domestic firms? LO3
3. If a nation exported much of its output but imported little, would it be better or worse off? How about the reverse, that is, exporting little but importing a lot? LO2
2. What would be the effects of a law requiring bilateral trade balances? LO2
1. Suppose a lawyer can type faster than any secretary. Should the lawyer do her own typing? Can you demonstrate the validity of your answer? LO1
LO3. How trade barriers affect prices, output, and incomes.
LO2. What the gains from trade are.
LO1. What comparative advantage is.
8. Who pays the economic cost of Social Security? In what ways? LO2
7. How would the distribution of income change if Social Security were privatized? LO1
6. Should the Social Security earnings test be eliminated? What are the benefits and costs of doing so? LO2
5. In what ways do younger workers pay for Social Security benefits received by retired workers? LO2
4. Once someone has received TANF welfare benefits for a total of 5 years, they are permanently ineligible for more TANF benefits. Should they receive any further assistance? How will work
3. If poor people don’t want to work, should they get welfare? What about their children? LO3
2. What’s so hard about guaranteeing everyone a minimal level of income support? What problems arise? LO2
1. If we have to choose between compassion and incentives, which should we choose? Do the terms of the trade-off matter? LO3
LO3. The trade-offs between benefit levels, marginal tax rates, and costs.
LO2. How transfer programs affect labor supply and total output.
LO1. The major income transfer programs.
10. What share of taxes should the rich pay (see Figure 33.4)? LO3
9. If tax breaks for the rich really stimulated investment and growth, wouldn’t everyone benefit from them? Why would anyone oppose them? LO3
8. Is a tax deduction for tuition likely to increase college enrollments? How will it affect horizontal and vertical equities? LO3
7. If the tax elasticity of supply were zero, how high could the tax rate go before people reduced their work effort? How do families vary the quantity of labor supplied when tax rates change? LO3
6. If a new tax system encouraged more output but also created greater inequality, would it be desirable? LO3
5. How might a flat tax affect efficiency? Fairness? LO3
4. What loopholes reduced the president’s tax bill (see News, page 666)? What’s the purpose of those loopholes? How else might those purposes be achieved? LO1
3. Do inequalities stimulate productivity? In what ways? Provide two specific examples. LO3
2. Why are incomes distributed so unevenly? Identify and explain three major causes of inequality. LO3
1. What goods or services do you and your family receive without directly paying for them? How do these goods affect the distribution of economic welfare? LO2
LO3. The nature of the equity-efficiency trade-off.
LO2. What makes taxes more or less progressive.
LO1. How the U.S. tax system is structured.
8. What is the price of Google stock now? What has caused the change in price since its 2004 IPO at $85 a share (News, page 649). LO3
7. What considerations might have created the difference between the coupon rate and current yield on GM bonds (Table 32.5)? LO2
6. How does a successful IPO affect WHAT, HOW, and FOR WHOM the economy produces? LO1
5. Why is it considered riskier to own stock in a software company than to hold U.S. Treasury savings bonds? Which asset will generate a higher return? LO3
4. If you could finance a new venture with either a stock issue or bonds, which option would you choose? What are their respective (dis)advantages? LO1
3. Why would anyone sell a bond for less than its face (par) value? LO2
2. Why would anyone buy shares of a corporation that had no profits and paid no dividends? What’s the highest price a person would pay for such a stock? LO2
1. If there were no organized financial markets, how would an entrepreneur acquire resources to develop and produce a new product? LO1
LO3. How risks and rewards are reflected in current values.
LO2. Key financial parameters for stocks and bonds.
LO1. The difference between stocks and bonds.
8. How will union mergers affect the market power of unions? LO2
7. A key issue in the 1998 GM strike involved “peg rates” that allow workers to go home or get paid overtime wages once production reaches a specifi ed level. How do peg rates affect productivity
6. In 1998, teaching assistants at the University of California struck for higher wages and union recognition, something they had sought for 14 years. How did the availability of replacement workers
5. Why are farm workers much less successful than airplane machinists in securing higher wages? LO2
4. Nonunionized fi rms tend to offer wage rates that are close to rates paid by unionized fi rms in the same industry. How do you explain this? LO
3. Are large and powerful fi rms easier targets for union organization than small fi rms? Why or why not? LO1
2. Does a strike for a raise of 5 cents an hour make any sense? What kinds of long-term benefi ts might a union gain from such a strike? LO1
1. Collective bargaining sessions often start with unreasonable demands and categorical rejections. Why do unions and employers tend to begin bargaining from extreme positions? LO2
LO3. How unions affect nonunion wages.
LO2. What factors affect the outcomes of collective bargaining.
LO1. How unions secure higher wages.
11. Is “excessive” CEO pay a public issue or a private issue? LO2
10. The minimum wage in Mexico is less than $1 an hour. Does this make Mexican workers more cost-effective than U.S. workers? Explain. LO2
9. Is it possible that the president of the United States is overpaid? How should his MRP be measured? LO2
8. In 2006 the chancellor of the University of Texas was paid $693,677 and the football coach was paid $2.6 million. Does this make any sense? LO2
7. Who is hurt and who is helped by an increase in the legal minimum wage? Under what circumstances might a higher minimum not reduce employment? LO3
6. How might you measure the marginal revenue product of ( a ) a quarterback and ( b ) the team’s coach? LO2
5. Is this course increasing your marginal productivity? If so, in what way? LO2
4. Explain why marginal physical product would diminish as (a) More secretaries are hired in an office. (b) More professors are hired in the economics department. (c) More construction workers are
3. According to the World View on page 604 does the substitution effect or the income effect dominate in India? In Russia? Why might this be the case? LO1
2. Would you continue to work after winning a lottery prize of $50,000 a year for life? Would you change schools, jobs, or career objectives? What factors besides income influence work decisions? LO1
1. Why are you doing this homework? What are you giving up? What utility do you expect to gain? LO1
LO3. How wage floors alter labor-market outcomes.

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