respond to classmate s answers 5
Make sure to respond to each of them. Try to include any relevant macroeconomic concepts or thinking as derived from your readings. Thank you!!
#1: Economics may be Dismal, but is it Science?
– The best argument in support of economics as a viable social science is in one of Joseph Epstein’s own examples of a new Burger King being built in a person’s neighborhood. Joseph notes that the neighbor to the new establishment was upset however Joseph’s cousin pointed out that the new restaurant would provide more benefit to the local economy by lowering taxes and lowering crime rates. With his cousin’s hypothesis it could be tested by comparing it to actual outcome of the crime rate and tax rates.
#2: Italian Deficits and Spending Stimulus !
– As the third-largest economy in the eurozone, Italy â€™s public debt is 130% of its GDP, well above the 60% cap set by the EU. Facing the harsh financial reality, the new government may face bankruptcy if it increases government expenditure and raises the government debt ratio. This will pose a threat to financial stability in the euro area. Also, it is different from Greece in the previous European debt crisis because Italy has a large economy. Today Italy is more dependent on the international market than ever. If the new Italian government violates some of its previous commitments, it will directly lead to rising international financing costs and trigger financial market turmoil. This disturbs both Italian citizens and entrepreneurs and leads to an economic downturn. The Italian government should stabilize the current economy and plan for future economic development.
#3: The Costs of Trade Wars.
– I personally don’t agree. Since these two countries have the world’s two largest economies, it seems the war will never end. This trade war would do serious damage to the global economy as protectionist actions escalate. Countries imposing tariffs and countries subject to tariffs would experience losses in economic welfare, while countries on the sidelines would experience collateral damage. If tariffs remain in place, losses in economic output would be permanent, as distorted price signals would prevent the specialization that maximizes global productivity. There are no real winners in this trade war. Countries facing new tariffs, including the United States, experience declines in real exports and GDP. Other countries are hit indirectly through weaker demand for their own exports, either through supply chains or in response to weaker global economic growth.