31.0%
Imports/GDP
34.0%
33.4%
Trade imbalance/GDP
-2.39%
-2.37%
b.
Federal Net Financial Debt/GDP
29.6% (2014)
28.9% (2015)
Analytical Problems
Yes, average labour productivity can fall even when total output is rising. Average labour productivity is total output divided by employment (of workers sixteen years old and over). So average labour productivity can fall if output and employment are both rising but employment is rising faster.
Yes, the unemployment rate can also rise even though total output is rising. This can occur through a number of channels. For example, average labour productivity might be rising with employment constant, so that output is rising; but the labour force may be increasing as well, so that unemployment is rising. Or average labour productivity might be constant, and both employment and unemployment could rise at the same time due to an increase in the labour force.
Just because prices were lower in 1914 than they were in 2013 does not mean that people were better off back then. People’s incomes have risen much faster than prices have risen over the last 99 years, so they are better off today in terms of real income.
There are many possible theories. One possibility is that people whose last names begin with the letters A through M vote Liberal while those whose names begin with the letters N through Z vote Conservatives You could test this theory by taking exit polls or checking the lists of registered voters by party. However, this theory fails the criterion of being reasonable, since there is no good reason to expect the first letter of people’s last names to matter for their political preferences.
A better theory might be one based on income. For example, you might make the assumption that the Conservatives party promotes business interests, while the Liberal party is more interested in redistributing income. Then you might expect people with higher incomes to vote Conservatives and people with lower incomes to vote Liberal. This could be tested by taking a survey of people as they left the polls. In this case the assumptions of the theory seem reasonable and realistic, and the model is simple enough to understand and to apply. So it is potentially a useful model.
a. Positive. This statement tells what will happen, not what should happen.
Positive. Even though it is about income-distribution issues, it is a statement of fact, not opinion. If the statement said “The payroll tax should be reduced because it . . . “ then it would be a normative statement.
Normative. Saying they are too high suggests that they should be lower.
Positive. Says what will happen as a consequence of an action, not what
should be done.
Normative. This is a statement of preference about policies.
A classical economist might argue that the economy would work more efficiently with NAFTA because it reduces trade barriers, making the invisible hand work even better. Workers could specialize even more than before, so that more total output would be produced by all three countries. Though the industrial mix might change in each country, wages and prices across industries would adjust quickly, and people in industries that closed down in a particular country would quickly find new jobs.
A Keynesian economist might be more sympathetic to concerns about NAFTA because of the belief that adjustment to the changes will not occur quickly. As a result, people in particular industries in a country may become unemployed.
Wages won’t adjust quickly to restore full employment, so some government action (like retraining programs to give displaced workers new skills) may be desirable.
Keynes was responding to the suggestion of classical economists that there was no need for a response to the Great Depression from government policymakers because in the long run the economy always adjusts back to full employment equilibrium. Keynes argued that this adjustment might take a long time and that it might be better for policymakers to take action to speed up the process of adjustment and so relieve the suffering of those suffering unemployment.