Answers To “Think About It” Questions

The United States Economy
  1. The Federal Reserve raised interest rates in order to try to slow the economy down so that prices do not rise too rapidly.
  2. The U.S. trade deficit is at a near-record level because imports are very high, while exports are sluggish. Imports are high because of the booming U.S. economy, which allows Americans to purchase goods and services from abroad, and because of higher oil prices. Exports are sluggish because many foreign economies are weak, preventing them from purchasing U.S. goods.
The Government Sector
  1. Gov. Bush has proposed cutting taxes by more than $1.3 trillion over the next 10 years. Vice-President Gore has proposed a more modest tax cut, with most of the surplus used to pay off the government’s huge debt and to shore up Medicare and Social Security.
  2. Republicans support eliminating the federal estate tax because they believe it is unfair to tax people after they are dead. Democrats oppose eliminating the tax because the benefits would go to very wealthy people.
Industry and Labor
  1. Flexible labor markets have made it possible for employers to hire new workers, without having to worrying about being stuck with them should their business fail to prosper.
  2. Judge Thomas Penfield Jackson determined that Microsoft had broken federal antitrust laws by trying to stifle competition.
The Financial Sector
  1. Technological changes and globalization have increased investors’ ability to and interest in investing in stock markets all over the world. Merging allows exchanges to offer investors a wider variety of stocks.
  2. Traditional investors generally invest in stocks they believe have good underlying value and will appreciate over time. Day traders are not concerned about underlying value, because they sell the stocks they buy after a few minutes or hours.
The Global Economy
  1. Organized labor may lose out from increased globalization, as consumers purchase less expensive imports rather than products made in America.
  2. U.S. exporters are hurt by a decline in the Euro, because it makes U.S. goods more expensive in Europe. U.S. importers are helped by the decline in the Euro, because it makes in the United States.