1)In the lectures on the economic way of thinking we have considered the basic assumptions of behavior that underlie the discipline (incentives, self-interest, efficiency) and the description of cost-benefit analysis at the micro level (marginalism and opportunity cost) and at the macroeconomic level (the lesson of Henry Hazlitt). I now want you to put that thinking process to use.

Some years back policy makers in the Kingdom of Bahrain were faced with rising inflation caused by the fall in the international value of the US dollar. The Kingdom's currency unit, the Bahraini dinar (BD), is pegged to the dollar, so when the dollar goes down the BD goes down. A weaker dollar/dinar means that anything and everything bought from overseas cost Bahrainis more. You also know that inflation over time can be caused by putting too much money into the economy and that a rise in prices of necessities can hurt consumers, especially low-income citizens.The government agreed at the time to give each low-income Bahraini household (but not non-Bahraini residents, who represent 52.7% of the Kingdom's population and 70%-plus of its workforce) BD50 (equal to $133) monthly to make it easier to buy what food they needed.

Given this background I am appointing you as a project manager whose task is to specify the outline of an investigation into whether or not this policy makes sense. Tell me how you would go about deciding if the policy makes sense rather than going the extra step to tell me whether the policy makes sense or not.What do you assume regarding the behavior of those affected, both citizens and non-citizens (Hazlitt's "groups")?What of short run versus long run? What questions would you ask and why? What data might you need?