Notes

MTR = ∆ Tax Linbility / ∆ Taxable Income
arguments for the govt to restrict trade:
A. National Defense Argument - not trading weapons, etc. so that a country can be self sustaining. >hurts international relations
B. Infant Industry Argument - enacting trade restrictions that help new industries so that they can grow. >once these industries are large enough to not need these restrictions, they are able to lobby to keep them anyway.
C. Antidumping Argument - ex. japan flooding the u.s. market with cheap cars. >difficult to prove.
Economic freedom is the most important ingredient for economic growth!
>>know the 6 economic factor things
Great depression was characterized by human suffering: soup lines, falling GDP, high unemployment
4 causes of great depression:
1. contraction of money supply. Govt aggressively reduced money supply following 1929 stock market crash. created uncertainty and price fluctuations.
2. Smoot-Hawley Tariff of 1930. Increased tariffs by +50% on 3200 foreign products. Foreign countries in turn responded with higher tariffs on us, thus reducing trade.
3. Tax increases. govt passed a huge tax increase in 1931, thus reducing the incentive to work and produce.
4. Price Controls, Regulations, and constant policy changes.
>Agricultural Adjustment Act (AAA): paid farmers to destroy crops
>National Industrial Recovery Act (NIRA): govt organized industries as cartels and prevented them from competing. dictated how they had to act.