Question Description

Quiz Instructions

THA1: What if Job Outsourcing (Imports) Were Banned?

Job outsourcing has been one of the key issues of all recent election campaigns. Many Americans believe that job outsourcing must be stopped, though some disagree and believe that job outsourcing is good for the US economy.

In any case, public opinion polls consistently show that Americans see job outsourcing as a critical issue and the Government cannot ignore it.

With unemployment remaining at the record high, the Government is considering all possible options and scenarios for dealing with the economic crisis and pleasing the voters. Nothing is off the table, including banning job outsourcing all together.

You are invited to join the Presidential Advisory Board on International Business and offer your forecast and evaluation of consequences for the following extreme scenario:

A complete ban on imports of all product groups that were predominantly manufactured in the US as of 1975 and are now imported from China, Mexico and other low-labor-cost countries. Essentially the new law will ban all imports of electronics, toys, apparel, cars, and many other general consumer goods. That means that all American companies that moved their production to other countries will have to return back to America if they want to sell their products in America.

Along with other experts, you are asked to predict and evaluate the economic consequences of the plan.

If you believe the effect may depend on (vary by) product group, region, population segment, business size, etc. you may provide additional explanation for the difference.

1. (5%) Variety

Will the variety of consumer products expand or shrink? Why?
First, state the trend

2. (10%) Quality:

Will the quality of consumer products improve or decline? Why?

Please explain the mechanism behind the stated trend.

3. (5%) Production cost:

Will the production cost go up or down? Why? Please explain the mechanism behind the stated trend.

4. (5%) Consumer prices

Will consumer prices go up or down? Why? Please explain the mechanism behind the stated trend.

5. (10%) Demand for products that were previously outsourced and must now be made 100% in America:

Will Americans now be able to buy more or fewer products of the affected categories (electronics, toys, apparel, cars, etc.)?

Hint: Keep in mind, desire to buy and demand are different things. Demand is quantity consumed, not desired quantity to consume. For example, I desire to drive a Ferrari, but I don't have $$ to buy one, so I create no demand for Ferrari cars.

Why?

Please explain the mechanism behind the stated trend.

6.(10%) Demand for other products and services that remained in the US:

Will Americans now be able to buy more or fewer products of other products and services (software, pharmaceuticals, financial and insurance services, etc.)?

Hint: think overall purchasing power of consumers.

why? Please explain the mechanism behind the stated trend.

7. (5%) Consumer prosperity

Will the plan have a positive or negative effect on Americans (consumers)?

Will Americans now afford/consume more or less goods/services overall? Why?

Please explain

8. (5%) Prosperity of American businesses

Will American companies (overall across all industries, in and outside the US) be better or worse off; make more money, be more competitive in the global arena? Why? Hint: Think not only about their ability to sell, but also about their ability to acquire parts, components, office supplies, etc.

Why?
Please explain the mechanism

9. Unemployment

Will the plan lower unemployment (% of population without jobs)? How?

Normally, any policy has some positive effects and some negative effects. For example, in the context of unemployment, the ban on imports may lead to increased employment in some sectors and job losses in others.

The overall effect of the policy is usually determined by which of the two effects is stronger.

Please show "both sides of the coin" by explaining what consequences of the ban on imports wish push unemployment up, and what consequences will push unemployment down. Then state the overall trend based on your understanding which of the two effects will be stronger.

9a. (10%) Factors decreasing unemployment

List factors/explain mechanism that will push unemployment down (put more people to work)

9b. (10%) Factors increasing unemployment

List factors/explain mechanism that will push unemployment up (more people out of work):

9c. The overall trend

State the overall trend (increase/decrease/no change).

10. Wages

Will real wages in the US go up or down? That is, will Americans make more or less in real wages/salaries (adjusted for inflation and purchasing power). Why?

Similar to the previous question, please explain how a ban on imports can lead to increased wages for some and decreased wages for others. Then draw a conclusion about the overall effect of the policy on wages.

10a. (10%) Factors pushing wages down

List factors/explain mechanism that will push wages down:

10b. (10%) Factors pushing wages up

List factors/explain mechanism that will push wages up:

10c. Trend

State the overall trend (increase/decrease/no change).

11. (5%) America’s competitive position in the global arena:

Will the plan make America more competitive in the global arena or not?

Why?

Explain the mechanism