ECO 101 Lecture Notes - Lecture 2: New Keynesian Economics, Confirmation Bias, Opportunity Cost
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Positi(cid:448)e: state(cid:373)e(cid:374)t of (cid:272)ause a(cid:374)d effe(cid:272)t, fa(cid:272)tually true (cid:894)at least it"s (cid:448)erifia(cid:271)le(cid:895: (cid:862)if (cid:373)i(cid:374)i(cid:373)u(cid:373) (cid:449)age is i(cid:374)(cid:272)reased, e(cid:373)ploy(cid:373)e(cid:374)t (cid:449)ill i(cid:374)(cid:272)rease(cid:863) Normative: statement of how the world should be changed for the better: (cid:862)the u go(cid:448)er(cid:374)(cid:373)e(cid:374)t should e(cid:374)gage i(cid:374) sti(cid:373)ulus spe(cid:374)di(cid:374)g duri(cid:374)g re(cid:272)essio(cid:374)(cid:863) Much of economics is focused on analysis of effects of specific policies: very tempting to weigh in, normative analysis: determined by values. Differences in scientific judgment: (cid:862)a (cid:373)i(cid:374)i(cid:373)u(cid:373) (cid:449)age i(cid:374)(cid:272)reases u(cid:374)e(cid:373)ploy(cid:373)e(cid:374)t a(cid:373)o(cid:374)g you(cid:374)g a(cid:374)d u(cid:374)skilled (cid:449)orkers(cid:863, only 79% agree, new keynesian vs. neo-classical view, confirmation bias and influence of values. Mutual gains from trade: requires specialization, absolute vs. Comparative advantage: trade and prices, real world evidence. Beneficial trade: can us and mexico improve through exchange: yes, but this requires specialization, ex. : if the us produces 5 million more tons of cars, they lose out on 5000 cars, and if. In order for beneficial trade, the exchange rate must be between the opportunity costs of both countries.
