Answered: Review the discussion of pitfallsin…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Review the discussion of pitfalls
in economic thinking in this chapter. Then identify the fallacy, or
mistake in thinking, in each of the following statements:
a. Raising taxes always increases government revenues.
b. Whenever there is a recession, imports decrease. Therefore, to
stop a recession, we should increase imports.
c. Raising the tariff on imported steel helps the U.S. steel industry.
Therefore, the entire economy is helped.
d. Gold sells for about $1,200 per ounce. Therefore, the U.S.
government could sell all the gold in Fort Knox at $1,300 per
ounce to reduce the national debt.

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Follow-up Question

Gold sells for about $1,200 per ounce. Therefore, the U.S.
government could sell all the gold in Fort Knox at $1,300 per
ounce to reduce the national debt - is this a fallacy of composition or causation?

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Follow-up Question

Review the discussion of pitfalls
in economic thinking in this chapter. Then identify the fallacy, or
mistake in thinking, in each of the following statement: Gold sells for $400 per ounce. Therefore, the US governement could sell all of the gold in Fort Knox at $400 per ounce and eliminate the national debt.

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