Answers PS1

Answers PS1 - Econ 3140 Spring 2010 Problem Set 1 Answer...

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Spring 2010 Problem Set 1 Answer Key 1. (a) Positive. This statement tells what will happen, not what should happen. (b) Positive. Even though it is about income-distribution issues, it is a statement because it . . . ,±then it would be a normative statement. (c) Normative. Saying taxes are too high suggests that they should be lower. (d) Positive. Says what will happen as a consequence of an action, not what should be done. (e) Normative. This is a statement of preference about policies. 2. Using information for the third quarter of 2009: (a) Exports/GDP 2009( III ) 0 : 1105 2008 0 : 1268 2007 0 : 1176 Imports/GDP 2009( III ) 0 : 1387 2008 0 : 1758 2007 0 : 1683 Trade Imbalance/GDP 2009( III ) & 0 : 02824 2008 & 0 : 04901 2007 & 0 : 05070 (b) Receipts/GDP 2009( III ) 0 : 1574 2008 0 : 1733 2007 0 : 1902 Gov Expenditures/GDP 2009( II ) 0 : 2628 2008 0 : 2277 2007 0 : 2127 Budget De²cit 2009( III ) & 0 : 1055 2008 & 0 : 0544 2007 & 0 : 0218 3. A classical economist might argue that the economy would work more e¢ ciently with- out the government trying to in³uence trade. The imposition of tari´s increases trade barriers, interfering with the invisible hand. The tari´s simply protect an industry that is failing to operate e¢ ciently and is not competitive internationally. A Keynesian economist might be more sympathetic to concerns about the steel industry. Keyne- sians might argue that there may need to be a long-run adjustment in the steel industry, but would want to prevent workers in the steel industry from becoming unemployed in the short run. 1
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This note was uploaded on 11/30/2011 for the course ECON 3140 taught by Professor Mbiekop during the Spring '07 term at Cornell.

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Answers PS1 - Econ 3140 Spring 2010 Problem Set 1 Answer...

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