ANALYTICAL PROBLEMS

1. Can average labor productivity fall even though total output is rising? Can the unemployment rate rise even though total output is rising?

2. Prices were much higher in the United States in 2022 than in 1890.

3. State a theory for why people vote Republican or Democratic that potentially could satisfy the criteria for a useful theory given in the text. How would you go about testing your theory?

4. Which of the following statements are positive in nature and which are normative?

a. A tax cut will raise interest rates.

b. A reduction in the payroll tax would primarily benefit poor and middle-class workers.

c. Payroll taxes are too high.

d. A cut in the payroll tax would improve the President's popularity ratings.

e. Payroll taxes should not be cut unless capital gains taxes are also cut.

5. In 2002, President George W. Bush imposed tariffs on certain types of imported steel. He argued that foreign steel producers were dumping their steel on the U.S. market at low prices. The foreign steel producers were able to sell steel cheaply because they received subsi­dies from their governments. The Bush administration

argued that the influx of steel was disrupting the U.S. economy, harming the domestic steel industry, and causing unemployment among U.S. steel workers. What might a classical economist say in response to these claims? Would a Keynesian economist be more or less sympathetic to the imposition of tariffs? Why?

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