EC 201 9-19-08 - Should govt. intervene? Interferences with...

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EC 201 9-19-08 Experiments – cyberspace – practice problem set o either buyer or seller – buyer: find a low price – seller: sell at high price o Site open 30 minutes before o Once started about 30 minutes Wild ride in financial market o 1819-1837-1873-1893-1907-(great depression 1929-1939) o Upward spiral of asset prices o Fueled by speculation o Overvalued assets – bubble bursts o Domino effect as financial institutions fail o Lehman Brothers o AIG o Fannie Mae + Freddie Mac o 1989-savings + loan crisis- “resolution trust” o US – 40 year consumption binge o Govt. budget deficits o Govt. saving < 0 o Private saving↓↓↓ ~ 0 o Nation consumes more than it produces o →either Investment collapses or Investment by borrowing from China, Japan, Korea, UK, Germany Not sustainable New fangled securities
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Unformatted text preview: Should govt. intervene? Interferences with international trade o Tariff=tax on imports o Import quota o With either tariff or quota, danger of retaliation o Voluntary export restraint Like quota run by exporters Exporters gain less pressure for retaliation o US has trade deficits (exports &lt; imports) o Cost per job saved o If trade with Canada is bad for US, trade with Ohio is bad for Michigan o jobilism o Any lost job is horrible o Power loom- hand weavers lost jobs o Kerosene lanterns-candle makes lost job o Electronic switching switchboard operators lost jobs o Better: prepare for tomorrows jobs o Safety net for those harmed o S to left o Elasticity=measure of responsiveness of D and S...
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EC 201 9-19-08 - Should govt. intervene? Interferences with...

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