Macroeconomics: The USA and the World Janet Orr CTL Teaching Retreat April 21-22, 2005

Global Connections for US Market Systems vs. Command Economy Economic Freedom Circular Flow Model of the US Economy International Trade Foreign Exchange Net Exports Effects of international economy on US Fiscal and Monetary Policy

Market Economy vs. Command Economy

Economic Freedom

Circular Flow Model of the US Economy

International Trade

Pros/Cons of Free Trade

Trade Agreements

Foreign Exchange

Net Exports

Size of US Economy Is Affected by International Economics GDP= C + G + I g +X n

Fiscal and Monetary Policies

2 out of 17 chapters covered this semester deal with international trade Many comparisons between conditions in the USA and other countries throughout the course Interdependence stressed Many discussion questions for my online macroeconomics course deal with international issues

Open-ended Questions for Online Macroeconomics Class According to the Heritage Foundation’s Index of Economic Freedom what is the Number one free economy of the world? Does this ranking surprise you? Why or why not? Why isn’t the United States ranked among the top three free economies? Right after WWII, about 1/3 of the world’s trade was with the US. Currently, about 1/8 of the world’s trade is with the US. Do you think that the reduction in percentage dependence on the U.S. for trade has a positive or negative effect on world stability? Explain your reasoning. Find a current political quote in favor of or opposed to a trade barrier. Why do you suppose this politician holds this opinion? Is there an economic basis underlying this position?

Open-ended Questions for Online Macroeconomics Class Support for trade barriers or protectionism is in seven areas: military self-sufficiency; increased domestic employment; diversification-for-stability; infant industry; strategic trade policy; protection against dumping; and, protection against cheap foreign labor. Pick one of the seven arguments and state both sides. Try to use a real world example to support your pro and con. Are you in agreement with any trade barriers? Why or why not? (Don’t forget barriers to countries whose policies are in direct opposition to ours.) In some of the discussions, we’ve mentioned job outsourcing; trade barriers are one to deal with this problem. Do you feel that the inefficient use of resources caused by trade barriers are a smaller problem than unemployment caused by outsourcing? Can you suggest another way to handle loss of jobs to more efficient countries?

Open-ended Questions for Online Macroeconomics Class Discuss the protests against the WTO. You can find additional information at Alternative views can be found at the website of Public Citizen ( ). In their words, “Public Citizen is a national, nonprofit consumer advocacy organization founded in 1971 to represent consumer interests in Congress, the executive branch and the courts. It almost sounds like a “catch 22”: If a country is doing well with high levels of income so that its citizens can afford to buy imported goods, then net exports may be negative which has the effect of reducing that country’s GDP. Is this a sufficient reason to implement trade barriers? Why or why not?

Open-ended Questions for Online Macroeconomics Class If a country has a trade deficit, what is the effect of depreciation in that nation’s currency relative to the currency of its trading partner with which the deficit is worst? Does this mean that there can be a positive to having a “weak” dollar? Explain one of the two views on the high rates of unemployment in Europe. How does having an open economy affect our fiscal policy? Discuss either shocks originating from abroad (use an example similar to the textbook’s example) or the Net Export Effect.