Macroeconomic Growth And Stability
Since its origins, capitalism has been plagued by periodic bouts of inflation (rising prices) and recession (high unemployment). Since World War II, for example, there have been nine recessions in the United States, some putting millions of people out of work. These fluctuations are known as the business cycle. Today, thanks to the intellectual contribution of John Maynard Keynes and his followers, we know how to control the worst excesses of the business cycle. By careful use of fiscal and...
Capital and Private Property
In a market economy, capital typically is privately owned, and the income from capital goes to individuals. Every patch of land has a deed, or title of ownership almost every machine and building belongs to an individual or corporation. Property rights bestow on their owners the ability to use, exchange, paint, dig, drill, or exploit their capital goods. These capital goods also have market values, and people can buy and sell the capital goods for whatever price the goods will fetch. The...
Introduction
As you begin your studies, you are probably wondering, Why study economics In fact, people do it for a number of reasons. Many study economics because they hope to make money. Some people worry that they will be considered illiterate if they cannot understand the laws of supply and demand. Others are interested in learning about how computers and the information revolution are shaping our society or why inequality in the distribution of income in the United States has risen so sharply in recent...
Questions For Discussion
Consider the following problem After your 8 hours a day of sleep, you have 16 hours a day to divide between leisure and study. Let leisure hours be the X variable and study hours be the Y variable. Plot the straight-line relationship between all combinations of X and Y on a blank piece of graph paper. Be careful to label the axes and mark the origin. 2. In question 1, what is the slope of the line showing the relationship between study and leisure hours Is it a straight line 3. Let us say that...
The Economic Role Of Government
An ideal market economy is one in which all goods and services are voluntarily exchanged for money at market prices. Such a system squeezes the maximum benefits out of a society's available resources without government intervention. In the real world, however, no economy actually conforms totally to the idealized world of the smoothly functioning invisible hand. Rather, every market economy suffers from imperfections which lead to such ills as excessive pollution, unemployment, and extremes of...
Twilight Of The Welfare State
In 1942, the great Austria-born Harvard economist Joseph Schumpeter argued that the United States was capitalism living in an oxygen tent on its march to socialism. Capitalism's success would breed alienation and self-doubt, sapping its efficiency and innovation. But he was wrong. The next half-century saw sustained growth in government's involvement in the economies of North America and Western Europe along with the most impressive economic performance ever recorded. Rapid economic growth has...
How To Read Graphs
Before you can master economics, you must have a working knowledge of graphs. They are as indispensable to the economist as a hammer is to a carpenter. So if you are not familiar with the use of diagrams, invest some time in learning how to read them it will be time well spent. What is a graph It is a diagram showing how two or more sets of data or variables are related to one another. Graphs are essential in economics because, among other reasons, they...
Putting the PPF to Work
The PPF in Figure 1-2 was drawn for guns and butter, but the same analysis applies to any choice of goods. Thus the more resources the government uses to build public goods like highways, the less will be left to produce private goods like houses the more we choose to consume of food, the less we can consume of clothing the more society decides to consume today, the less can be its production of capital goods to turn out more consumption goods in the future. The graphs in Figures 1-3 to 1-5...
Scarcity And Efficiency The Twin Themes Of Economics
What is economics Over the last half-century, the study of economics has expanded to include a vast range of topics. What are the major definitions of these growing subjects 1 The important ones are that economics analyzes how a society's institutions and technology affect prices and the allocation of resources among different uses. explores the behavior of the financial markets, including interest rates and stock prices. examines the distribution of income and suggests ways that the poor can...
