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Unformatted text preview: Economics 21 Spring 2008 Week 9: Discussion Section These questions relate to an article by Paul Krugman which appeared in “The Dismal Science” 8/13/98 and which you can find on BB. It is a great, great, article from a time when Paul Krugman was writing mostly about economics, before the Bush Administration drove him crazy. 1) Why did the babysitting co-op fall into recession and how was the recession ended? Script supply was too small causing AD for sitters to be lower. People saving script so people can’t earn more script(unemployment) All acting rational but still ending in a recession. It was ended by allowing people to borrow scripts they issued more scripts out. Not enough coupons. Everyone wanted to save coupons and babysit so noone could hire themselves out as babysitters. Saving is good for the future and bad for the could hire themselves out as babysitters....
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This note was uploaded on 04/07/2008 for the course PHI 101 taught by Professor Finberg during the Spring '08 term at Swarthmore.
- Spring '08