1. Was it due to good policies? access to bountiful resources? luck?
2. See the discussion on pages 128 and 129.
3. The New Economy refers to the spread of technology and computers throughout the economy as a catalyst for economic growth. Several problems exist for sustained growth based on the New Economy. These include overcapacity in plant and equipment and a hesitancy to finance new startups due to the bursting of the dot com bubble.
4. See the discussion on pages 130 - 134.
5. The US has a very low savings rate and high consumption rate compared to other countries and this shows up in the form of chronic trade deficits. In order to finance these trade deficits, America must borrow money from overseas to help maintain our current consumption patterns. If the US were to take steps to curtail our imports, this might cause serious economic problems for the economies of our trading partners (who depend on our spending habits to support their economies).
6. The three treasures are: lifetime employment, seniority wages, and enterprise unions. Factors that may be leading to their disappearance include the economic slowdown and the growth of international competition. (Why?)
7. Vertical keiretsu are organized as a group of firms along the supplier--producer--distributor chain. Horizontal keiretsu firms are primarily involved in the same line of business. Keiretsu help reduce the cost of engaging in repeated market transactions by developing long-term relationships among group members. Member firms, however, may lose the competitive edge in such cosy arrangements.
8. I'll leave this one for you to ponder.
8. The government, through MITI, has implemented a variety of "industrial policies" designed to aid various targeted industries. MITI has also used its powers to promote export growth. The government has also designed numerous policies to encourage national saving (over consumption), which is important for economic growth.
9. I will leave this question for you to ponder.
10. See pages 166 to 168 for a discussion of the factors that lead to the slowdown of the Japanese economy.
12. See pages 159 and 160 for this question.
13. Dirigisme goes back to the 17th century and is associated with the building up of a strong and centralized French nation state. Laissez faire developed as a rebellion to this centralizing and statist tendency in economic policy and management. The flip-flopping of national policy, particularly in terms of nationalization of private industry, has contributed to uneven economic growth.
14. For: it can provide information pooling and coordinated action among major economic agents which may in a self-fulfilling prophetic manner bring about a higher rate of economic growth. Against: planners may lack crucial information and their plans may lose credibility as external shocks occur and circumstances change. Also, planners may have incentives to renege on promises (e.g., time inconsistency problems)
15. French indicative planning has had more of a macroeconomic focus while Japan has been oriented toward industrial policies. France has had a larger state-owned sector and places more emphasis on regional planning compared to Japan.
16. This largely reflects the long history of intense class conflict in France. France is a hierarchical society with rigid and sharply defined class lines.
17. It has been a love-hate relationship. The French look to the EU for agricultural and regional subsidies and attempt to make it follow their own policies such as protectionism and indicative planning. At the same time they resent it for the threatened loss of their national sovereignty it represents.
18. The EU represents a much higher degree of economic integration than NAFTA. NAFTA is merely an agreement among Canada, Mexico, and the US to reduce trade barriers. The EU represents a common market, common external tariffs, common currency, etc.
19 See the PowerPoint slides and visit the following web site The EU- A Guide for Americans.
20. Think back to the debate over allowing Turkey to join the EU.
21. This is for you to ponder.
22. How do you define success?
23. You can point your finger to a number of factors: high nonwage costs (payroll taxes), high reservation prices (due to generous welfare programs), fragmented labor markets (due to culture and language), and a rigid collective bargaining system.
24. We did this one as homework.
25. This is for you to work out.
26. Banks play a large role in each economy. They also tend to run large trade surpluses.
27. The unexpected drop in East German output after re-unification was costly. EG was also quite polluted and required substantial clean-up costs. Privatization is a costly and lengthy process.
28. See page 253 and 254 for the details.
29. This is in your notes.
30. This would be a great graphical question for the exam.