what will happen if a particular policy is put in place. It could be an impact on trade flows, comparative advantage, production, winners and losers, real and nominal wages, rental rates on capital, and on land, labor allocation, labor participation, etc. You can do this in three ways
- Find an already existing policy, imagine we lived before if was implemented, and hypothesize what the effects would be (then see if you were correct)
- Find a proposed policy which has not yet been enacted and try to see with the SFM what this policy would do. A good place to go would be the websites of political candidates running for office to check out their proposed policy plans. For example, a few people in a previous semester were very interested in Andrew Yang’s policies, so feel free to speculate based on logical progressions, the effects these policy proposals would have on the above outcomes.
- Make up your own policies. Think of an issue you would want to solve, create a policy you think will address it, and then use the SFM framework to examine the implications.