q-2 - The Choice Chapters 1-12 I. Chapter 1 a. David...

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The Choice Chapters 1-12 I. Chapter 1 a. David Ricardo i. Financer, then a politician ii. Theory of comparative advantage 1. On the Principles of Political Economy and Taxation a. Showed how nations benefit from free trade b. Dangers of protectionism and the benefits of free trade II. Chapter 2: the challenge of foreign competition a. Protectionism i. “buying American will make America rich again” ii. Want a “want a level playing field, competition is the way of life” III. Chapter 3: the roundabout way to wealth a. ‘urban renewal’ b. Two ways to make a tv i. The direct way 1. Build a factory, combine raw materials with people and machines ii. The roundabout way 1. Make tvs by making something else, trading c. Can exchange currency only because someone with dollars wants to buy something made in Japan and needs yen to do it. Otherwise no one would give up dollars for yen, and the bank wouldn’t exchange currencies i. The currencies merely facilitate the transaction of trade between two goods d. A foreign company may be able to make something, just not equally well i. Resources are limited
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1. Not only raw materials, but so are people, the # of hours in a day, and how hard people are willing to work e. Better to specialize in a few things rather than trying to do everything f. Time is scarce (the ultimate scare resource) g. The theory of competitive advantage i. Even if a nation is relatively poor at doing everything there are some things it does relatively well. And a nation that is really good at many thing should still specialize in producing some items import the rest h. Devoting scarce resources to one item means having less of something else i. Trade looks like competition but it is really a form of cooperation j. The wealth of a society isn’t measured by how many pieces of paper a citizens holds – think about goods, services, and leisure IV.Chapter 4: Is trade good for America? a. Allows us to have a higher standard of living b. All nations involve in trade prosper c. ‘production or nonsupervisory workers’ make up about 80% or the workforce d. The right measure of a worker’s well-being should measure all forms of compensations, not just hourly wages e. The broadest measure of economic well-being would be per capita GPD (gross domestic product) i. The broadest measure of how productive and wealthy we have become 1. But still underestimate how much progress was made from 1960-2004 because of how hard it is to measure inflation accurately, when the quality of items is constantly improving a. Due to better technology V. Chapter 5: Are manufacturing jobs better than service jobs? a. There has been a steady growth of service jobs and steady decrease in manufacturing jobs as a proportion of total employment
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i. Manufacturing declined for two reasons: 1. Technology a. New production processes were invented that make works more productive 2. Those same processes allowed foreigners with little skill but low wages the change to be as productive as some Americans were at
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q-2 - The Choice Chapters 1-12 I. Chapter 1 a. David...

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