Question

In: Economics

i. Apply specific models developed throughout the course to demonstrate how domestic and foreign events (e.g.,...

i. Apply specific models developed throughout the course to demonstrate how domestic and foreign events (e.g., wars, changes in trade barriers, development abroad) have impacted the level of and changes in imports and exports in the United States from 2000-2010.

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Expert Solution

  ANSWER

To understand the domestic origins of foreign economic policies we need to perform two main tasks first, map the policy preferences of different groups in the domestic economy, and then specify how political institutions affect the way these preferencesare aggregated into actual government decisions.
During this period policy preferences depend mainly on the types of assets people own, and how the income earned from those assets is affected by different policies.Political institutions affect policy outcomes by defining who gets to vote, how political representatives are elected, and how policy making takes place in legislatures and is delegated to presidents and government agencies.New ideas about cause-and-effect relationships appear to have had a large impact on foreign economic policies in different eras. The relationship between ideas and interests is far from clear, however, and we need a better understanding of where new ideas about policy come from and what explains which ideas catch on and spread.

After a tumultuous century embroiled in world wars and financial crises, the United States economy at the end of the 20th century was experiencing a period of economic calm wherein prices were stable, unemployment fell to its lowest level in 30 years, the stock market boomed and the government posted a budget surplus.Technological innovations and a rapidly globalizing market contributed to the economic boom near the end of the 90s, then again between this period, but many other factors — including presidential policy, foreign affairs, and domestic innovations and foreign supply and demand needs — affected the rise of the American economy as it entered the 21st century. Long-term challenges like poverty, especially for single mothers and their children, and environmental quality of life still faced the nation as it prepared to enter a new century of technological development and rapid globalization. war, and American advances in technology and manufacturing techniques.

As the United States passed into the early 2000s, one principle remained strong and true in terms of its economy: it was and would always be a market economy where

In this free market economy, Americans feel that the true value of a good or service is reflected in its price, guiding the production end of the economy to only produce what is needed according to the supply-and-demand model, which leads to peak economic efficiency.As is the tradition in all things concerning American politics, it is essential to limit the government's involvement in determining the economic market of its country in order to prevent an undue concentration of power and promote the pluralist foundation of the United States

Foreign economic policies of US involve a complex set of issues about which most voters have very low levels of information. As a result, the politics of globalization may be regarded to some degree as a competition in issue framing among organized interests.If private actors have incomplete information about the degree to which the government is committed to policy reforms, the government may have an incentive to tie its own hands in some visible way(e.g. by fixing the exchange rate, or signing a trade treaty) to signal its intentions in a credible way. Since the effects of a change in one type of foreign economic policy may depend upon choices made about other types of policy, individuals may have preferences over different combinations of policies that are closely related (e.g. tariffs and restrictions on inward investment induced by tariffs).


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