absolute advantage that American workers have over Asian workers. However, Asian workers may still have a comparative advantage. And if that is the case, then banning imports would result in inefficiency.
Solutions to Section 1 Problems 31 c.If America channeled more of its productive resources into producing clothing, it would have to give up producing other goods. As a result, America would be able to consume less of all goods. And this would make some Americans clearly worse off. Therefore, this policy would not be efficient. d.Low-wage Asian workers would also be hurt by this policy. The Asian country would channel its resources away from producing clothing toward producing other goods that it previously imported from America. But since it does not have the comparative advantage in those other goods, the Asian country would be able to consume less of all goods. 5. a.True. This is a positive statement. It has a factual answer; that is, it is either right or wrong. There has been some debate about whether the statement is actually true or false, but in principle there is only one answer. b.False. This is a statement about what we should do, and this statement has no clearly right or wrong answer. Your view will depend on whether you think encouraging more work is a good or a bad idea. c.True. Economics is best at giving positive answers, for instance, answers about what the most efficient way is of achieving a certain aim. The question of how society ought to be organized is mostly decided in the realm of politics. d.False. This is a positive statement. In principle, it has an answer that is either right or wrong. e.False. Some disagreements among economists arise from the fact that in building a model, one economist thinks that a certain abstraction from reality is admissible but another economist may think that that abstraction is not admissible. Some disagreements arise from the fact that economists sometimes disagree about values.
32 Section 1: Basic Economic Concepts 6.A business-cycle expansion is a period of recovery after a recession, and lasts until the next economic downturn. An expansion can occur regardless of any increase in the economy’s long-term potential for production. Economic growth increases the economy’s ability to produce more goods and services over the long term, and can last for several decades. 7.True. With hindsight it is easier to see the important features of the situation that a model should have captured. For predictive purposes, a model needs to anticipate which features of reality are important (and so should be included) and which are unimportant (and so can be ignored). This is why the famed British economist John Maynard Keynes referred to economics as an art as well as a science.
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