Premium Essay

Economics

In: Miscellaneous

Submitted By blaine
Words 1408
Pages 6
4.) M1 = currency (in circulation) + checkable deposits. The largest component of M1 is currency (52 percent), and it is the only part that is legal tender. If the face value of a coin were not greater than its intrinsic (metallic) value, people would remove coins from circulation and sell them for their metallic content. M2 = M1 + noncheckable savings deposits + money market deposit accounts + small time deposits + money market mutual fund balances. M3 = M2 + large time deposits (those of $100,000 or more). Near-monies are components of M2 and M3 not included in M1. M3 is distinguished from M2 by large time deposits (certificates of deposits).

5.) There is no concrete backing to the money supply in the United States. Paper money, which has no intrinsic value, has value only because people are willing to accept it in exchange for goods and services, including their labor services as employees. And people are willing to accept paper as money because they know that everyone else is also willing to do so. If the monetary authorities were issuing new banknotes at a rate far in excess of available output, the acceptability of paper money would diminish. People would start to worry about whether the banknotes would be worth much after they received them. Checks are part of the money supply and are not legal tender, but people accept them willingly from people believed trustworthy. The value or purchasing power of money is inversely related to the price level. The Board of Governors of the Federal Reserve System (the Fed) is responsible for managing the United States’ money supply so that money retains its value.

6.) In the first case, the value of the dollar (in year 2, relative to year 1) is $.80 (= 1/1.25); in the second case the value is $2 (= 1/.50). The price level and the value of the dollar are inversely related.

7.)
a) The level of nominal...

Similar Documents

Premium Essay

Economics

...Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)".[1] Political economy was the earlier name for the subject, but economists in the late 19th century suggested "economics" as a shorter term for "economic science" that also avoided a narrow political-interest connotation and as similar in form to "mathematics", "ethics", and so forth.[2] A focus of the subject is how economic agents behave or interact and how economies work. Consistent with this, a primary textbook distinction is between microeconomics and macroeconomics. Microeconomics examines the behavior of basic elements in the economy, including individual agents (such as households and firms or as buyers and sellers) and markets, and their interactions. Macroeconomics analyzes the entire economy and issues affecting it, including unemployment, inflation, economic growth, and monetary and fiscal policy. Other broad distinctions include those between positive economics (describing "what is") and normative economics (advocating "what ought to be"); between economic theory and applied economics; between rational and behavioral economics; and between mainstream economics (more "orthodox" and dealing with the "rationality-individualism-equilibrium......

Words: 290 - Pages: 2

Free Essay

Economics

...What is Econometrics? Econometrics is a rapidly developing branch of economics which, broadly speaking, aims to give empirical content to economic relations. The term ‘econometrics’ appears to have been first used by Pawel Ciompa as early as 1910; although it is Ragnar Frisch, one of the founders of the Econometric Society, who should be given the credit for coining the term, and for establishing it as a subject in the sense in which it is known today (see Frisch, 1936, p. 95). Econometrics can be defined generally as ‘the application of mathematics and statistical methods to the analysis of economic data’, or more precisely in the words of Samuelson, Koopmans and Stone (1954), ... as the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference (p. 142). Other similar descriptions of what econometrics entails can be found in the preface or the introduction to most texts in econometrics. Malinvaud (1966), for example, interprets econometrics broadly to include ‘every application of mathematics or of statistical methods to the study of economic phenomena’. Christ (1966) takes the objective of econometrics to be ‘the production of quantitative economic statements that either explain the behaviour of variables we have already seen, or forecast (i.e. predict) behaviour that we have not yet seen, or both’. Chow (1983) in a more recent textbook succinctly defines econometrics ‘as...

Words: 736 - Pages: 3

Premium Essay

Economics

...Economics is the social science that analyzes the production, distribution, and consumption of goods and services. Economics explains how people interact within markets to get what they want or accomplish certain goals. An economy exists for two basic reasons, firstly, human wants for goods and services are unlimited and secondly, productive resources with which to produce goods and services are scarce. An economy has to decide how to use its scarce resources to obtain the maximum possible satisfaction of the members of the society. Economics is studied so you can become a well-informed citizen. Political and social leaders often develop policies that have broad economic effects. International relations are also dominated by economic concerns. Economic knowledge is needed if you are to understand the effects of taxation, unemployment, inflation, welfare, economic growth, exchange rates, or productivity. We also study economics because it helps the individual make more informed decisions. Consumers, workers, and investors usually make wiser choices if they understand the likely economic effects of the choice to be made. Business executives have more insight for making decisions if they understand how the economy works and the likely effects of economic conditions on a business. Hypotheses are propositions that are tested and used to develop economic theories. Highly reliable theories are called principles or laws. Theories, principles, and laws are meaningful......

Words: 259 - Pages: 2

Premium Essay

Economics

...classified and analyzed. The first studies on the economic impact of port activity emerged in the United States in the second half of the 1960s. The ports of New York and New Jersey were the first to be taken into consideration. In the 1970s, the first methodological discussions took place, based on the development of the input–output model and its application to the measurement of the impact of ports. The main stances opposing this kind of study were advocated by Robert C. Waters, while those in favour had Semoon Chang as their main champion, and most of Waters’ criticisms were dealt with. 1. PORT ECONOMIC IMPACTS Ports contribute much to their economies, and port economic impact analysis is the major tool for documenting those contributions. The primary objective of port impact studies is to inform the public of the importance of port services, and additional benefits that may exist vary with particular studies. And also, the decision of local governmental agencies to construct port facilities is often preceded by a port economic impact study. The majority of existing port impact studies begin with definitions of port impacts, as an improper notion of port impact might well lead to an entirely wrong estimation of the total economic impact of a port. One of the major challenges in port impact studies is to identify the port-related industries and find out the degree of port dependency of these industries. Generally, economic impacts of port on the local economy......

Words: 5423 - Pages: 22

Premium Essay

Economics

...MAIN TOPICS OF MICRO ECONOMICS I. BASIC CONCEPTS OF ECONOMICS 1. Nature and Scope of Economics 2. Some Basic Concepts 3. Methodological Issues in Economics 4. Methods Laws and Assumptions in Economic Theory 5. Economic Models 6. Production Possibility Curve and Circular Flow of Economic Activity 7. Economic Statics and Dynamics 8. Economy Its Vital Processes and Basic Problems 9. Economic Systems 10. Price System and Mechanism 11. Equilibrium 2. CONSUMPTION THEORY 1. Neo-Classical Utility Analysis 2. Demand and its Law 3. Indifference Curve Theory 4. The Concept of Consumer’s Surplus 5. The Revealed preference theory of demand 6. Elasticity of Demand 3. PRODUCTION THEORY 1. Factors of Production 2. Characteristics of Land and Labour 3. Theories of Population 4. Division of Labour and Machinery 5. Capital and Capital Formation 6. Localisation of Industries 7. Scale of Production 8. Types of Business Units 9. Organisation 10. Laws of Returns : The Traditional Approach 11. Laws of Returns : The Isoquant and Isocost Approach 4. PRODUCT PRICING 1. Nature of Costs and Cost Curves 2. Market Structures 3. The Concept of Revenue 4. Supply – Its Law, Elasticity and Curves 5. Equilibrium of Firm and Industry Under Perfect Competition 6. Pricing under Perfect Competition – Demand and Supply 7. Applications of Demand and Supply Analysis under Perfect Competition 8. Joint Demand and Supply 9. Monopoly 10. Monopsony and Bilateral......

Words: 326 - Pages: 2

Free Essay

Economic

...Thesis Economics Thesis The goal of an economics thesis is to solve a problem regarding the exchange of goods and services in an innovative way. To this end, the student may explore macroeconomics, the study of large economics systems, or microeconomics, the study of person-to-person exchanges of goods and services, in a completely unique manner or in a manner that simply expands on or addresses previous ideas. Students who are struggling to develop ideas for their economics theses may benefit from asking themselves what problems they have a passion for solving. For example, perhaps the student feels greatly irritated about gas prices and could develop an idea on how to cut costs. Perhaps the student has a fascination with the failure of communism and would like to develop a thesis on where the economic system went wrong and why. If the student cannot identify a topic that would produce a viable economics thesis, he or she should talk with the major professor and see if together they can brainstorm a usable idea. Economics theses may have concerns that most disciplines do not have, particularly in formatting. Because pictures can carry a great deal of information in a much more succinct way than text and because economics theses often handle highly complex issues, writers of economics theses may find it useful to include a number of charts, graphs, and tables both in appendices and in the body of the thesis itself. Depending on the complexity of those graphics, the......

Words: 344 - Pages: 2

Premium Essay

Economics

...stirred up a massive cause for debate, and for the correct reason. The decision the English citizen is going to comprehend is crucial for the welfare for the English economy, and is known to be the ‘’most important decision you’ll make in a generation’’ As quoted by George Osbourne, Chancellor of the Exchequer, in an article about foreign relations with Brussels. It is a very important decision to the English taxpayer, but is equally important for the British economy, but I think, is arguably most important for the small or large, private or public, English Business. The English economy is growing by 1.5% per annum, this is not enough. Compared to foreign relations such as China, with a G.D.P growth rate or economic growth rate of nearly 9% a year, China has a faster economic growth rate by 6x. Now what do these numerical figures mean in contrast to leaving the EU? Well, whether or not to leave the EU has a massive effect on our economy, influenced by trade. But how does this correlate to affecting British businesses? Well a faster, well protected economy will allow businesses to run faster, trade faster, produce faster, and become efficient, which...

Words: 788 - Pages: 4

Premium Essay

Economic

...Economic Decisions Individuals and societies alike face many decisions. Individuals tend to make economic decisions when faced with trade-offs, and because of that, individuals are required to compare costs and benefits of their alternative actions referred to as the opportunity cost. Rational individuals tend to think of marginal change during the process of decision-making, and therefore, may respond differently to incentives whilst making economic decisions. This paper discusses the four principles of economics, a decision associated with marginal change, the incentive(s) that could lead to making different decision, and finally, how the principles of economics affect decision-making, interaction and the workings of the economy as whole. The Principles of Economics A trade-off is often referred to as the “technique of reducing or forgoing one or more desirable outcomes in exchange for increasing or obtaining other desirable outcomes to maximize the total return or effectiveness under given circumstances.” (BusinessDictionary.com, 2009) In brief, individuals choose something over something else, or give up something in order to get something else. Whatever “it” is that individuals sacrifice in order to get something, is generally “its” cost, and cost is often linked and associated with money, an opportunity cost however, could be the cost of anything i.e. time or health sacrificed in order to get something. Marginal changes are incremental adjustments individuals make...

Words: 853 - Pages: 4

Premium Essay

Economics

...single monopoly and share production and profit. However, if this price-fixing game is repeated indefinitely, it would come to a moment that one firm cheats on their collusive agreement. If the cheater cuts its price and the complier remains the agreed price. As shown in the figure, for the complier, ATC now exceeds price and for the cheater, the price exceeds ATC. The industry output is larger than the monopoly output and the industry price is lower than the monopoly price. The total economic profit made by the industry is also smaller than the monopoly’s economic profit. Therefore the complier incurs an economic loss while the cheater gains economic profit. If since both firms have an incentive to cheat as long as price exceeds marginal cost. In this price-fixing game, it will occur a situation that both firms cheat. If both firms produce more cigarettes than the number agreed, the industry output will be increased, the price of cigarettes will fall and both firms makes zero economic profit, as shown in the figure. -In monopolistic competition a company in the short run, makes its output and price decision just like a monopoly company does. The following figure illustrates the monopolistic competition in the short run. As you can see, when the marginal revenue equals its marginal cost (MR = MC), the firm charges the highest price (P) that buyers are willing to pay for this quantity, which is highly higher than the average total cost (ATC). Therefore the firm makes...

Words: 620 - Pages: 3

Premium Essay

Economics

...RESOURCE | 1 ECONOMICS RESOURCE | 1 ECONOMICS 2009-10: FUNDAMENTALS OF ECONOMIC THINKING Table of Contents Preface to the Economics Resource .................................................................................. 5 Fundamentals of Economics ............................................................................................ 7 The Basic Economic Problem—Scarcity ............................................................................................ 8 Production of Goods and Services .................................................................................................... 10 Increasing Costs ............................................................................................................................... 12 The Factors of Production ............................................................................................................... 14 Benefit-Cost Analysis – Marginal Decision-Making ......................................................................... 15 Marginal Utility and Waffles ............................................................................................................ 17 More on Marginal Utility and the Effect of Prices ............................................................................ 19 Individual and Social Goals .............................................................................................................. 20 Positive and Normative Economics......

Words: 65448 - Pages: 262

Premium Essay

Economics

...• ECONOMICS a science which studies human behavior as a relationship between ends and scarce mean which have alternative uses Economics is essentially a science of choice. And the problem of choice arises due to the problem of scarcity. In general, economics is basically a study of the ways in which people apply their knowledge, skills, and the efforts to the gifts of nature in order to satisfy their material wants. Economics is all about satisfaction of materials wants. The truth is that it is people's wants which provide the motive for economic activity. People go to work in order to obtain an income which will buy them the things they want. IT the resources available to people are insufficient to satisfy all their wants, such resources are said to be scarce. In fact is that we almost always find ourselves in a situation of scarcity. We cannot have all the things we want. The resources available to satisfy our wants are, at any time, limited in supply. Our wants however, appear to be unlimited. This is the economic problem faced by us - by each member of society. And, this problem of scarcity forces us to make choice. We can have more of food by having less of clothing. Economics is a lot more lively than many people have thought of. It's basically about decision making which we do everyday. And we live by participating in daily economic activities, influencing other people by making choices in our own interest and at the same time are subject to all other people's......

Words: 1121 - Pages: 5

Free Essay

Economics

...elderly population is twice what it is today. Much of this growth will be prompted by the aging of the Baby Boomers, who in 2030 will be aged 66 to 84—the “young old”—and will number 61 million people. In addition to the Baby Boomers, those born prior to 1946—the “oldest old”—will number 9million people in 2030. This paper assesses the economic dimensions of the 2030 problem. The first half of the paper reviews the literature and logic that suggest that aging in general, and long-term care services in particular, will represent an overwhelming economic burden on society by 2030. Then, a new analysis of burden is presented to suggest that aggregate resources should not be a major issue for the midcentury economy. Finally, the paper presents four key challenges that represent the real economic burden of long-term care in the twenty-first century. These challenges are significant but different from macro cost issues. What type of economic burden might be considered overwhelming? Existing literature never explicitly defines this but the sense is that the burden might be considered overwhelming if: (a) tax rates need to be raised dramatically, (b) economic growth is retarded due to high service costs that preclude other social investments, or (c) the general well-being of future generations of workers is worse than that of current workers due to service costs and income transfers. The discussion has significant implications for public policy and for private actors focused on......

Words: 373 - Pages: 2

Premium Essay

Economics

...1.) Write an essay on the assumption of the “Rational Self Interest”. Make sure that you touch on each of the three components of this assumption that we discussed in class. Comment on the relevance of this assumption in our daily lives. Economics is defined as how we make choices with scarce resources to obtain our own needs, wants and desires. The Assumption of Rational Self –interests tells us that the definition of rationality means not doing something that will deliberately cause harm. We are told that with every decision we make, we must weigh the rewards against the punishments and that it is actually necessary for us to ask the question “What is in it for me”. There is actually a difference between acting selfishly and acting on the best of our own self- interest. Acting selfishly means that in doing so, you are causing harm to others. Acting in your own self- interest actually benefits others. Adam Smith is known as the father of Economics. In 1776 he purchased The Nature and Causes of the Wealth of Nations. Today the title has been shortened and is known as Wealth of Nations. Smith was asking the question, why powerful countries such as Spain and Portugal collapsed while a small country such as England thrived. The biggest difference he found was that while Spain and Portugal denied their colonies education, England encouraged it. Smith believed that governments have to give people incentive to do well. He stated that self-interest should be encouraged in every......

Words: 1677 - Pages: 7

Free Essay

Economics

...ABSTRACT ECONOMIC GOVERNANCE IN PAKISTAN The paper’s main thesis is that the difficulty Pakistan has faced in maintaining macro-economic stability, sustaining economic growth and delivering public services to the poor can be ascribed to weak economic governance and gradual decline in the capacity of key institutions. To strengthen economic governance a non-partisan long term strategic approach is required in which narrow political considerations are set aside and a concerted effort is made to strengthen the key institutions that form the essential core of economic governance. As the capacity of these institutions takes several decades the temptation by incoming governments to abandon or neglect institutions or policies, projects and programs inherited from the previous regime should be seriously curbed. The tendency of starting with a clean slate every time a new government ushers in power without achieving tangible results is painful and also politically costly. It is better to build and consolidate on the previous programs and policies, fine tune and modify them according to the changed circumstances and experiences. The gains become visible during the incumbency period of the incoming government that can then claim credit for the realization of those achievements. The author is former Chairman, National Commission for Government Reforms and is currently Director Institute of Business Administration – Karachi 2 ECONOMIC GOVERNANCE IN PAKISTAN ISHRAT......

Words: 2365 - Pages: 10

Free Essay

Economic

...Principle of economics “Economics is about making choices when options are limited.” ((O'Sullivan, 2011 p.13) The world revolves around choice, and its made by all sorts of people. The economist job isn’t to choose for us but to help us understand the trade offs. Decisions are not made to be spontaneous. Therefore it takes a lot to consider what to buy, what occupation to pursue, and how money to save. Economist, understand this in all matters so the key questions are as follows; what products do we produce? How do we produce the products? Who consumes the products? (O'Sullivan, 2011 p.4) But this isn’t the only thing an economist considers, there also includes four elements to consider for decision-making. An economic way of thinking is through assumptions, isolate variables, think at the margin, and respond to incentives. (O'Sullivan, 2011 p.8) Real life situations, call for real life theories. One major real life problem is of alcohol abuse. Two economic solutions are to impose higher taxes, or increase the prices. Both of these would be considered a good solution because people act rationally in their own self-interest. (O'Sullivan, 2011 p.6) Imposing taxes or increasing the prices we would assume that every drink has the same alcohol effect towards people. To focus on the effects of alcohol abuse economist would make assumptions that imposing taxes and increasing prices would decrease alcohol consumption. Of course it also depends on the way that the inflation would...

Words: 480 - Pages: 2