Unit 5

-
  • Disinflation
    • this also occurs when aggregate demand declines
    • a reduction in inflation rate from yr to yr seen in LRPC
  • Deflation
    • general decline in the price level
  • Hyperinflation
    • when economy experiences a high and unusual rate of inflation which can decrease value of local currency
  • Supply-side economics
    • changes in AS not AD 
    • to determine the level of inflation, unemployment rates, economic growth
    • aka Reaganomics
    • trickle-down effect
    • economists support policies that promote GDP growth by arguing that high marginal tax rates along with the current system of transfer payments (these transfer payments: unemployment compensation, welfare programs provide disincentives to work, invest, and undertake entrepreneurial ventures 
  • Laffer-Curve
    • depicts theoretical relationship between tax rates and government revenue
    • as tax rates increase from zero, tax revenues increase from zero to some maximum level and then decline 
    • 3 criticisms of the laffer curve
      • empirical evidence suggests that the impact if tax rates on incentives to work, save, and invest are small
      • tax cuts also increase demand which can fuel inflation
      • where the economy is actually located, on the laffer curve is difficult to determine

Comments

Post a Comment

Popular posts from this blog

-
GDP  GDP gross domestic product - total market value of all final goods and services produced within a country's borders with in each year.  GNP gross national product - the sum of all total goods and services produced by residents of a country during a given year. Using foreigners.  Intermediate goods-  goods that require further processing before they are ready for final use. Ex: steering wheel, something that you use to make a product What’s not included in GDP?  1.) Used goods/ second hand goods- Trying to avoid double or multiple counting.  Ex: whoever purchased that item once is official. So, if someone bought it again it can't be counted. 2.) Gifts or transfer payments- can be public or private. Ex: transferring funds from one institution/ individual to another. For private it would be scholarships for transfer it would be welfare or social security.  3.) Stocks and bonds- purely financial transactions 4.) Unreported...
Read more
-
Image
BASIC ECONOMIC CONCEPTS Before anyone can start learning the more complex parts of economics they must first understand some of the more basic principles. Microeconomics- Supply and demand. Firms reaction. Positive vs. Normative economics- Positive economics claims that attempt to describe the world as is. Very descriptive. An example would be minimum wage laws causes unemployment. Current is 7.25. Minimum wage laws causes unemployement. This excludes things like waitors. Normative economics claims that attempt to prescribe how the world should be. Very prescriptive. Based on an opinion. An example is that the government should raise the minimum wage.  Wants- desire of the citizens Needs- basic requirements for survival. Scarcity- fundamental economic problem that all societies face. Unlimited wants with limited resources. Shortage- looking where quantity demanded is greater then quantity supplied. Prices rise. Surplus- opposite of shortage. An abundance ...
Read more
-
Image
MOVEMENTS OF PPG (POSSIBLE POSSIBILTY GRAPH) Now that we know some basic terminology as well as basic ideas of economics, we will now transition to basic graph of economics and later on follow up with some examples.  "Full Employment"- not 100% employment not 100% productive. 4-5% unemployment. 80-90% factory capacity.  Movements of the PPG 1) Inside of the curve Underemployment- have the people and no resources and vice versa, unemployment, and recession (war, famine, natural disasters etc.)  2) Along the curve Shift along the curve. Equal production or making more than another product. Can always shift to underemployment to the line and vice versa.  3) shifts (outside) of the curve Opportunity cost- next best alternative that you must give up in order to get something else.  Law of the increasing opportunity cost- as you produce more of one good the opportunity cost (far-gone production of another good) will increase. Concave vs...
Read more