Reference no: EM133203923

Assignment:

1. Mainstream economics teaches us that market competition is the most efficient way to regulate the production and distribution of commodities. And yet, many who are critical of President Trump's policies have argued for the government to command enterprises to produce what is needed for this public health emergency and then distribute the goods according to need.

In one paragraph, briefly give me at least two reasons why it might make sense for the government to suspend the market and take control of the production and distribution of goods.

In a second paragraph, explain what problems a government's command and control policies might cause.

In a final paragraph, tell me whether or not you think the critics of President Trump are correct.

2. Assume that China and the United States only produce two goods: Food and Medical supplies.

The following table describes the production possibilities facing China and the United States.

When answering these questions, assume that the trade-off in the production of food and medical supplies is always the same.

A. What is the opportunity cost of producing food (in terms of medical supplies) in China? What is the opportunity cost of producing food in the United States?

B. Which country has a comparative advantage in food production? Which country has a comparative advantage in medical supply production?

C. Show how China and the United States can benefit by specializing production and engaging in trade.

D. If you were a policy maker in the United States, would you follow the law of comparative advantage and allow your country to specialize in the production of the good in which the United States has a comparative advantage? Explain your answer in no more than two sentences.

E. If you were a policy maker China, would you follow the law of comparative advantage and allow your country to specialize in the production of the good in which China has a comparative advantage? Explain your answer in no more than two sentences.

3. Economic policy has been described by some commentators as hyper-Keynesianism. On the other hand, others have argued this term is misplaced because the goal of the policy is not to expand aggregate demand but to maintain income.

A. In one paragraph, explain why the term hyper-Keynesianism might be appropriate when describing most countries' fiscal and monetary policies today. Try to be as specific as possible.

B. In one paragraph, explain how these policies serve as an income maintenance program.

C. Think about your own economic situation. Without providing personal details you do not wish to share, write a paragraph explaining how you think the present Covid-19 economic crisis is affecting your economic future. Do you think government policies are helping you or hurting you? Write no more than one paragraph.

4. Since the financial crisis of 2008, the world economy has grown steadily until March of this year. I began this semester by noting that we were in an era of unprecedented prosperity, even though we faced serious problems of economic inequality and global warming. We are now in what I would call a policy-induced global depression causing negative growth and rising unemployment. The ten years of growth were also associated with increased globalization which began to reverse before this crisis with the election of Donald Trump and the United Kingdom's decision to leave the European Union.

A. In one paragraph, explain why do many economists associate globalization with increased economic growth, especially in poorer countries?

B. Has the global pandemic permanently hurt globalization (global trade, investment, and the movement of people across national borders)? Explain your answer in one paragraph.

C. Use economic concepts (such as comparative advantage, rates of investment, and technological change) to explain whether or not you think economic growth will rebound after this crisis has passed. One paragraph only.