What the falling dollar means to you

The dollar is falling against the euro and the canadian dollar. If you're curious what that means, and as a student of economics you ought to be, you should read this article in Slate.

Alternate Assignment

As a reminder, there is no class meeting today. In compliance with the collective bargaining agreement between the faculty and PASHEE, I offer up an alternate assignment today for your edification.

Read the following Wikipedia link on economist Alfred Marshall.

Assignment (worth up to 2 bonus points added to your test you just took on Wednesday):

Write or type a one paragraph response to the following:

How is Alfred Marshall relevant to our studies so far this semester?

The response to this will be scored between 0 and 2 points, based on quality of the response. Points will be added to your raw score on Test 1.

This is due IN CLASS on Monday, September 24, 2007.

Have a safe and sane weekend.

JJ

Answer Key for sample test 1 *MY BAD*

Unfortunately I did not read the comments to the answer key. I was called out a few times on my answer to problem 1. You are correct, it is NOT D. The answer is C.

I guess I was expecting an alert via email or AIM. Anyway, I apologize for the confusion. I know the same questions showed up on the real test. They are not fully scored but I will make sure that anyone who answered D because this key said D will be properly awarded the point.

But just to be clear: our wants are unlimited, but resources are limited.

Answer Key to Sample MC Questions for Test 1

Here is the key to the sample test.

1-D, 2-D, 3-A, 4-B, 5-B, 6-B,
7-C, 8-C, 9-B, 10-B,
11-B, 12-A, 13-D, 14-D*, 15-B, 16-B, 17-B,
18-D, 19-A, 20-B, 21-D, 22-B,
23-C, 24-A, 25-C, 26-A or D**, 27-A, 28-B, 29-B, 30-C,
31-B, 32-A, 33-A, 34-B, 35-D,
36-C, 37-D, 38-C, 39-C, 40-C, 41-B, 42-C,
43-A, 44-C, 45-B, 46-B, 47-D.

Some comments:
* When on a PPF, to get more of one good you must give up another. However to get more of one good, in this problem "oil" the output of the other good, helmets, decreases at an increasing rate, not decreasing.

**The circular flow problems on this sample test reflect the model previously used in my course (due to a different book). Although both are acceptable, A may look more like the diagram in the Taylor text.

For you test the wording will be chosen to reflect the material as presented in class and in the Taylor text.

For problems 41, 45, and 47: Both demand and supply shift. When both shift it is important to note that one variable (P or Q) will clearly change in a particular direction, but while one clearly moves the other can move up or down, ultimately uncertain.

41: Demand falls, pushing down P and Q. Supply increases, pushing down P and increasing Q. In sum, P falls but Q can go down or up or stay the same.

45: Supply will fall, pushing P up and Q down. Demand increases, pushing P up and Q up. Price will clearly go up, but the movements in Q can be somewhat offsetting, depending on the magnitude of the shifts of the curves.

47: The costly ad program raises costs of producing milk. Supply decreases. But the ad campaign successfully increases demand. Price will rise due to both, but Q could go up or down or remain the same.

Hint: For these market problems, you should draw S and D curves, shift them appropriately, and see how P and Q ultimately change.

Let me know if you think there are any errors on the key. I threw it together rather quickly. (I certainly use more caution when it is a real test.)

Good luck.

September 17: Constitution Day

In honor of Constitution Day, commemorating the day the Constitution of the United States was adopted by the constitutional convention and sent to the states for ratification, a few items relevant to the functioning of the US economy are noted below.

COMMERCE CLAUSE
Article I, Section 8 states that Congress shall have the power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;..."

COINAGE CLAUSES
Article I, Section 8 states that Congress shall have the power "To coin Money, regulate the value thereof, ..." and "To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;..." Article I, Section 10 gives Congress this power exclusively by stating that "No State shall...coin Money;..."

COPYRIGHT CLAUSES
Article I, Section 8 states that Congress shall have the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writing and Discoveries;..."

CONTRACT CLAUSES
Article I, Section 9 states that "No Bill of Attainder or ex post facto Law shall be passed..." by Congress. Article I, Section 10 states that "No state shall...pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligations of Contracts,..."

EXPORT CLAUSES
Article I, Section 9 states that "No Tax or Duty shall be laid on Articles exported from any State...", and Article I, Section 10 states that " No State shall without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports,..."

SEARCHES AND SEIZURES
Amendment IV states that "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated,..."

DUE PROCESS
Amendment V states that "No person shall...be deprived of life, liberty, or property, without due process of the law;..." and Amendment XIV, Section 1 states "nor shall any State deprive any person of life, liberty, or property, without due process of law;..."

RESERVED RIGHTS AND POWERS
Amendment IX states that "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people." And Amendment X states "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

© National Council on Economic Education, New York, NY

On trading with people we don't like

The story at this link is rather interesting. It discusses our trade relations with a few countries that we have issues with in the international arena, namely Iran and Venezuela.

One thing to think about when we trade with others: When we trade we most frequently trade with people we don't know. It is very impersonal. Even when we trade with Americans we likely trade with people, if we got to know them, we probably wouldn't like very much (different religion, they smell, they eat grits, or whatever). Yet we trade. We generally regard going to the store as something for our own benefit, not the benefit of the seller.

Dead Economists

When discussing "comparative advantage" in the context of the Tribes of Roma: Tivoli and Frivoli, I mentioned two economists, names with which you should become a bit familiar.

Here are two wikipedia links for your benefit:

Adam Smith, The Wealth of Nations, 1776

David Ricardo, Principles of Political Economy and Taxation*, 1817

*In class I was not able to instantly recall the name of his work. I noticed on your homework papers many jotted down "he wrote some book". This is the name of his book.

I guess I should make use of the internet in class. We do have this technology!

Regards,

JJ

Homework #2

On homework #2 you are to fill in a table of opportunity costs. Unfortunately that table is mislabeled.

Rather than Roma and Tivoli, you should calculate opportunity costs for Tivoli and Frivoli. I'm sorry about the confusion.

JJ