BU ECON162 Trumps State of the Union

ECON 162 BU Trumps State of the Union Discussion

ECON 162-A1, A2

 PROBLEM SET NUMBER TWO

1. This first question asks you to view Trump’s State of the Union Address on February 4, 2020. You can complete this question once the State of the Union Address has been delivered.

First, go to http://www.whitehouse.gov and search for “State of the Union Address”.

You can either watch the video or read the transcript. Second, answer the following questions:

a. How does the president characterize the current state of the US economy? What evidence does he offer to support his arguments?

b. What macroeconomic variables are considered in the speech?

 c. What proposals are offered to improve the condition of the American economy?

 d. What proposals are offered to improve the U.S. financial system?

e. From the president’s speech in question 1, find a

 i. normative, macroeconomic statement.

 ii. positive, microeconomic statement.

 iii. normative, microeconomic statement.

iv.. positive, macroeconomic statement.

 2. Suppose that you construct a PPC for the United States economy with manufactured goods (M) on the vertical axis and agricultural goods (A) on the horizontal axis. Assume that resources are specialized. Show how the PPC changes as a result of the following events:

a. 1,096,611 immigrants emigrated to the United States in 2018.

(https://www.dhs.gov/immigration-statistics/yearbook/2018/table1)

b. In 1918, an influenza epidemic afflicted more than 25% of the U.S. population. (http://www.archives.gov/exhibits/influenza-epidemic/)

c. Hurricane Sandy devastated farms and crops from Cuba to Canada in the fall of 2012. (http://www.mnn.com/earth-matters/climate-weather/blogs/hurricane-sandy-wreaksagricultural-havoc )

d. Throughout the 1970s and 1980s, genetic engineering increased crop yields in the United States. (http://www.chemistrylearning.com/benefits-of-genetic-engineering/ )

e. “Ford is canceling plans to build a new plant in Mexico. It will invest $700 million in Michigan instead, creating 700 new U.S. jobs.”

(http://money.cnn.com/2017/01/03/news/economy/ford-700-jobs-trump/ ) (You do not need to visit the sites listed, they are just provided as reference.)

3. Suppose that you are planning a Valentine’s Day party where you will serve cookies (C) and brownies (B). You have four hours to prepare for the party. Suppose that in one hour you can produce twenty cookies or forty brownies.

a. Draw your production possibilities curve for four hours of time. Put brownies on the vertical axis. Why is your PPC linear?

b. What is the opportunity cost of one cookie?

 c. On a separate graph, show the effect of increasing your amount of time from four hours to five hours. Draw both the original and new PPCs.

d. Going back to four hours of time, suppose that you invent a brownie machine that doubles the amount of brownies you can produce per hour. How does the PPC change? Draw both the original and new PPCs. e. In part d), now what is the opportunity cost of one cookie?

4. Your roommate Pat decides to help with the party. The amounts of brownies and cookies which can be produced in an hour (if all resources are devoted to that good) are shown by the following table:

YOU PAT COOKIES PER HOUR 20 5 BROWNIES PER HOUR 40 20

Where both cookies and brownies are measured in units.

a. Who has an absolute advantage in producing brownies? Cookies?

b. For you, what is the opportunity cost of producing one brownie? Of one cookie?

c. For Pat, what is the opportunity cost of producing one brownie? Of one cookie?

d. Should you and Pat specialize? Who should produce what?

e. Suppose that you have so many guests that you have to split up the party into two rooms. You throw one party and Pat throws the other. What are the terms of trade? (At what rate would you each be willing to trade?)

 f. Using graphs for both you and Pat, show that trade allows each of you to achieve a point on your consumption possibilities curve which is greater than your production possibilities curve. Be sure to label all curves and axes.

f. What is this principle called?

5. To learn about the economic effects of Trump’s tariffs, please view the following websites: https://www.washingtonpost.com/business/2019/08/20/trumps-trade-war-comesconsumers-tariffs-will-cost-us-families-year-jp-morgan-forecasts/?noredirect=on

 https://fee.org/articles/trump-s-washing-machine-tariffs-cost-consumers-800-000-perjob-created/

https://www.vox.com/policy-and-politics/2019/12/29/21041238/trump-tariffs-trade-warfederal-reserve-manufacturing-consumer-prices

 https://www.reuters.com/article/us-usa-solar-jobs/us-solar-jobs-down-for-second-year-astrump-tariffs-weigh-idUSKCN1Q1132

 then answer the following questions:

a. According to the Washington Post, what is the cost of the recent tariffs on the average US family as estimated by JP Morgan Chase. Why?

 b. According to the Foundation for Economic Education, what have been the effects of the tariffs on washing machines? What is the cost per job saved?

 c. What is the cost of protecting one job in the specialty steel industry? In the dairy products industry?

d. According to Vox and the Federal Reserve, what have been the effects of the Trump tariffs on the US economy overall?

e. According to Reuters, what have been the effects of imposing tariffs on the solar power industry?