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mLine 39:
Line 39: − "Sticking with the question, the U.S. has to produce some goods to be able to trade with. The U.S. could not simply spend all its money on imports and sustain that indefinitely."+ − +
→'''Question 37 on the final exam'''
I thought of a better answer to your previous comment:
I thought of a better answer to your previous comment:
"Sticking with the question, the U.S. has to produce some goods to be able to trade with. The U.S. could not simply spend all its money on imports and sustain that indefinitely."
You're right, it can't simply spend all its money on imports and sustain that indefinately. Nor, can it spend all its money on producing tennis shoes asnd sustain that indefinately either. My next comment is this: Your solution defies the Coase Theorem! ''In a world with no transaction costs '' (you did not mention any in the question) ''there will be the same amount of economic activity'' '''''regardless of who owns what.''''' '''BECAUSE CHINA CAN PRODUCE SHOES MORE CHEAPLY THAN THE U.S. THEY '''''MUST''''' PRODUCE ALL THE SHOES!''' Weather the U.S. has any alternate means of income does not change the fact that they will accuire the shoes more cheaply if they buy them from China. --[[User:BenjaminS|Ben]] <sub>[[User Talk:BenjaminS|Talk]]</sub> 21:34, 24 May 2007 (EDT)
You're right, it can't simply spend all its money on imports and sustain that indefinately. Nor, can it spend all its money on producing tennis shoes asnd sustain that indefinately either. My next comment is this: Your solution defies the Coase Theorem! ''In a world with no transaction costs '' (you did not mention any in the question) ''there will be the same amount of economic activity'' '''''regardless of who owns what.''''' '''BECAUSE CHINA CAN PRODUCE SHOES MORE CHEAPLY THAN THE U.S. THEY '''''MUST''''' PRODUCE ALL THE SHOES!''' Whether the U.S. has any alternate means of income does not change the fact that they will accuire the shoes more cheaply if they buy them from China. --[[User:BenjaminS|Ben]] <sub>[[User Talk:BenjaminS|Talk]]</sub> 21:34, 24 May 2007 (EDT)
== Final Exam ==
== Final Exam ==