_ 1. A survey which sought the opinion of professional economists on fourteen
propositions about economic policy found that
a. the respondents were almost equally divided on the propositions.
b. the respondents favored the propositions by a slight margin.
In conducting their research, economists face an obstacle that not all
scientists face; specifically, in economics, it is often difficult and sometimes
make use of theory and observation.
rely upon the scientific method.
Trade agreements and the WTO
World Trade Organization, WTO
Unilateral approach to achieve free trade
Great Britain, 19th century
Chile and South Korea, recent years
Reduce its trade restrictions while other countries do the same
Remove its trade restricti
The Laffer curve and supply-side economics
1974, economist Arthur Laffer
Tax rates were so high, that reducing them would actually raise
Ronald Reagans experience in film industry
High tax rates caused less
Domestic equilibrium price before trade is above world price
Once trade is allowed
Domestic price drops to equal the world price
Domestic quantity supplied is less than domestic quantity
The difference: imports
Should the U.S. trade with other countries?
Goods produced abroad and sold domestically
Goods produced domestically and sold abroad
U.S and Japan
Each produces food and cars
One American worker, one month
One car, or
Two tons of food
_ 1. In the straight-flow diagram,
a. factors of production flow from government to firms.
b. goods and services flow from households to firms.
c. income paid to the factors of production flows from firms to
d. spending on goods and services f
A Parable for the Modern Economy
Specialization and trade
Farmer Frank specializes in growing potatoes
More time growing potatoes
Less time raising cattle
Rancher Rose specializes in raising cattle
More time raising cattle
Less time growing potatoes
_ 1. When economists are trying to help improve the world, they are
in the realm of positive economics rather than normative economics.
in the realm of macroeconomics rather than microeconomics.
_ 2. For economists
Winners and Losers From Trade
Domestic equilibrium price before trade is below the world price
Once trade is allowed
Domestic price rises to equal the world price
Domestic quantity supplied is greater than domestic