Bu204 Macroeconomics Unit 2 Assignment Essay

1835 Words Oct 11th, 2012 8 Pages
Renea Frymoyer
September 29, 2012


1. A representative of the American clothing industry recently made the following statement: “Workers in Asia often work in sweatshop conditions earning only pennies an hour. American workers are more productive and as a result earn higher wages. In order to preserve the dignity of the American workplace, the government should enact legislation banning imports of low-wage Asian clothing.” Answer the following:

a. Which parts of this quote are positive statements? Which parts are normative statements?

Positive statements are “claims that attempt to describe the world as it is” (Mankiw, 2011, p. 31).
Normative statements are “claims that attempt to prescribe how the
…show more content…
Answer the following:

a. What would shoppers see when they shopped in Wal-Mart and the other “big box” stores that sell so many imported items?

If the government enacted a special tax on imported clothing making the selling price equal to the selling price of clothing made in the United States, shoppers would see imported items with much higher prices in discount stores. If the prices of clothing made in sweatshops and in the United States were comparative, shoppers would consider the trade-offs and opt to buy clothing made in the United States for higher quality, loyalty to United States workers, and the health of our economy (Mankiw, 2011, p. 4). Wal-Mart and “big-box” stores that sell so many imported clothing items would see a decrease in sales. Shoppers would choose to buy clothing at stores that sell clothing made in the United States. These stores would see an increase in sales.

b. Would this tax policy have a better effect, worse effect, or no different effect on American workers than the legislation banning the imports discussed in question 1? What kind of effect would the tax have on the Asian workers?

Trade between two countries can make each country better off (Mankiw, 2011, p. 10). Third-world countries with sweatshops have a comparative advantage in producing clothing at a lower opportunity cost (Mankiw,

More about Bu204 Macroeconomics Unit 2 Assignment Essay

Open Document