1.

In their introduction to Freakonomics, the authors state, Since the science of economics is primarily
a set of tools, as opposed to a subject matter, then no subject, however offbeat, need be beyond its
reach. (pg, 14) Based on our class lectures, explain clearly what you think they mean by this.
As was discussed in class, there are many ways to define economics. One definition was the study of
choices given infinite wants and scarce resources. Given this definition, economists are allowed extensive
freedom. By economics being primarily a set of tools, Dubner and Levitt mean that the methods
economists use to study choices are not applicable solely to what economics is commonly linked with: i.e.
money or the stock market or interest rates. Just as we had discussed choosing whether to stay on the meal
plan was an economics decision, Dubner and Levitt also stepped out of the commonly perceived realm of
economics and examined eclectic choices from teachers cheating to baby namesdemonstrating the
versatility and reach of economics.

2.

Friends of mine are doing research on the issues listed below. Is the nature of their work positive or
normative? If you answer positive, what would be a normative slant on that research, or vise-versa.
a. Randall is investigating the influence of increasing the money supply on interest rates.
Positive. Normative-slant: Randall investigates whether the Fed should increase the money
supply or interest rates.
b. Jane is investigating the role of proteins in muscle building.
Positive. Normative-slant: Randall investigates if athletes should increase their proteins to
build muscles.
c. Debraj is investigating whether the Government of India should ban micro-credit organizations.
Normative. Positive-slant: Debraj investigates the effects of micro-credit organizations on
local communities.
d. Jonathan is studying how Earlham students can be made to be better behaved.
Normative. Positive-slant: Jonathan investigates the effects different on-campus factors have
on students behavior.
3.

The social, political, and cultural underpinnings of a country shape the economic institutions of a
society, and in turn the economic and material outcomes of a society reflect its collective ethical ethos.
Reflect on this statement and evaluate it.
As was discussed in class, economics has been accused of being imperialistic in that it sometimes
extends into other fields such as politics or sociology. Conversely, economics can also be seen as
welcoming to other fields with the clear example being Nobel Laureate Herbert Simon who was also a
leading expert in the fields of political science, psychology and sociology. Economics is so imperialistic
and accessible because many different factors are connected to or are influenced by the way in which
society make choices. These factors make up the political, social and cultural framework of society. A
simple example is government subsidy of education. Underneath this policy is the value of equality and the
belief that all individuals within a society deserves to be educated. By having government subsidize
education, society is making a choice to allocate and distribute resources in a certain way. Alternatively, a
society may decide to subsidize education because it believes the population will become more productive
and growth will ensue. As a byproduct of this subsidization, the population becomes more intellectual and
adopts values such as equal opportunity to education.

4.

Irrespective of what kind of an economic system a country chooses it has to attempt to solve some
fundamental economic questions. What are they?
A country has infinite wants and scarce resources. Thus, it has to decide what goods and services to
produce to satisfy its wants and how to produce these goods and services given scarce resources. This is the
problem of allocation. Another question a country has to answer is who gets the goods and services. This is
the problem of distribution.

5.

Explain the difference between ideologies (Marxism, Libertarianism) economic systems (Capitalism,
Socialism, Command Economies, Market Economies, Mixed Economies), and schools of economic
thought (Keynesianism, the Neo-Classical School, the Institutionalists etc.).

Economic systems are how a society addresses the problem of allocation and distribution.
Ideologies, on the other hand, are ways that certain people believe society should use to address the
problem of allocation and distribution. Finally, school of economic thoughts are groups of economists who
agree on certain aspects of economics and policy. Ideologies, economic systems, and schools of economic
thoughts all have overlaps. These overlaps can be seen, for example, on the liberal-conservative spectrum:
marxism, socialism, command economies are all considered far left because of the heavy influence of the
state on economic activity. Conversely, capitalism and market economies are considered right. Most
developed economies today are mixed and many employ keynesian economics (such as the US during the
2008 crisis) or follow the Neo-Classical school of thought.
6.

What is the stock market? In 150 words answer that question. Your answer should make an
intelligent 8 grader understand what a stock market is after reading your answer.
Companies are initially privately owned meaning a certain number of people get all the profits.
After some time, some companies will decide to go public and sell its stocks on the stock market. A stock is
a right to a percentage of the companys profit so if a company has 10 stocks on the market and an
individual owns 1 stock, they have the right to 1/10 of all future profits of the company. A company will
only receive money the very first time it sells its stocks because after the first transaction the money goes to
the stockholder. The stock market allows stocks to be sold and bought. The price of a stock goes up if many
people want to buy it and down if many people are selling it. Individuals do not buy stocks simply for
future profits but also with the hopes that they can sell at a higher price later.
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7.

What is the DJIA, the NASDQ 100, and the S&P 500? Name the major stock indexes in England,
Germany, Japan, India, Mexico, China, and Brazil.
The Dow Jones Industrial Average (DIJA), the NASDQ 100 and the Standard & Poor 500 are all
computed from the value of a group of stocks and used to measure the stock market. The Dow Jones
includes 30 of the largest companies in the US and is price weighted meaning each companys influence on
the index is dependent upon its stock price. The NASDQ 100 and the S&P 500 are both market weighted so
the companys market value determines its influence on the index. The NASDQ 100 is composed of 100
largest companies listed on the NASDAQ exchange. The S&P 500 represents approximately 70% value of
all US stocks, and is often used to represent the market movement. The major stock indexes in England is
the FTSE 100, in Germany the DAX, in Japan the NIKKEI 225 and TOPIX, in India the SENSEX, in
Mexico the Mexican Bolsa, in China the Shanghai Composite, and in Brazil the Bovespa.

8.

http://www.bloomberg.com/quote/SHCOMP:IND give you a graph of the Shanghai Stock Exchange

over the last year. Explain what has been happening in the Chinese stock market over the last year.
Be as clear as you can.
On 09/10/2014 the Shanghai Stock Exchange Composite Index was 2,318.305 points. Today, on
09/10/2015, SHCOMP is 3,160.167 points. Over the past year, the SHCOMP increased by 36.31%. Though
this increase may be a significant positive change, it does not tell the entire situation of the Chinese stock
market in the last year. The SHCOMP had been increasing quite rapidly since last year, rising to a peak of
5,166.350 on 06/12/2015. This is near 200% increase over 9 months. However, since June, the SHCOMP
has plummeted rapidly, losing around 2000 points or nearly 40% of its peak value in June in a period of
about three months.

9.

Speak to three of your friends who have not done a course in economics and ask them what they
think economics is all about and what they think economists do. Write down clearly what each of
your friends says about economics and economists. Ill create a space to upload all the surveys and
lets see what pans out collectively.
Linh: Economics is about stocks. Economists study the growth and development of countries, investments
and business.
Quynh Anh (she has read about economics but has not taken a class): Economics is about how to fulfill
limited wants given limited resources. Economists can be divided into two types. The first does research
and consulting for governments and large non-governmental organizations to recommend policies for
economic growth. The second works as consultants in the economic sector to recommend strategies for
growth in the market.

Natalie: Economics is the study of how goods and services change hands. Economists analyze trends and
look at how the economies work within themselves and within others.
Maite: Economics is a science that focuses on products and services. Economists are someone who focuses
on the changes in the financial world and explains why these changes happen.