Movies

Question 1

How does Reich define the middle class?

Answer 1

Reich describes the middle class as anyone making within 50% of the median income. if the median income is 50,000 the range would be 25,000-75,000

Question 2

Identify and explain the market changes that occurred in the 1980’s that led to the downward pressure on median wage according to Reich:

Answer 2

• Globalization

* Technology

Question 3

Identify and explain the “rules of the game” changes that occurred in the 1980’s that contributed to a greatly widening income gap:

Answer 3

• Union busting
• Reduction in spending on education. Higher education rates flattened
• Reduced taxes on highest marginal rate

Question 4

What were the rules of the game from the New Deal to the 1980’s that helped the economy grow and inequality to decrease?

Answer 4

• Education was a national priority (GI Bill)
• 1/3 of workers belonged to labor unions
• Higher rates on the highest marginal rate

Question 5

Why is it important to use median wages instead of average wages?

Answer 5

Average wages are skewed by extremely high salaries.

Question 6

Given that median (real) wages were declining since approximately 1980, identify and describe the three coping mechanisms that households used to maintain their (real) household income.

Answer 6

• Women went to work
• We worked longer hours
• Borrowing

Question 7

Why is the high degree of inequality a problem for the US? (what are the problems that Reich argues are caused by the high degree of income inequality )

Answer 7

• Flattened middle class wages

* Access to members of the government

Question 8

What were the two years when inequality peaked?

Answer 8

• 1928

* 2007

Question 9

Think about the production process of a high tech product like the ipod. In which countries is the highest value added and thus income earned in producing it.

Answer 9

• Japan

* Germany

Question 10

Explain how the high savings rates of high income households holds back GDP.

Answer 10

You can only buy so many pillows. Rich save a higher percentage of their income, which in turn does not contribute to the GDP thus creating jobs.

Question 11

What is the meaning of the economic term “negative externalities”?

Answer 11

An economic activity that imposes a negative effect on an unrelated third party

Question 12

The movie talks about corporations being a negative externality machine. What does the film maker mean by this?

Answer 12

That as Corporations are bound to produce the most profit possible for stockholders they externalize cost where ever possible.