Ten Principles of Economics - Part 53

... through policies that promote economic growth. Most of this chapter is summarized in one of the Ten Principles of Economics: A country’s standard of living depends on its ability to produce goods ... extra unit of an input declines as the quantity of the input increases catch-up effect the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich ... countries that start off rich 540 PART NINE THE REAL ECONOMY IN THE LONG RUN This catch-up effect shows up in other aspects of life. When a school gives an end -of- year award to the “Most Improved”...

Ten Principles of Economics - Part 44

... amount of income— $100,000 in our example—were fixed. But, in fact, it is not. Utilitarians reject com- plete equalization of incomes because they accept one of the Ten Principles of Economics ... the form of goods and services rather than cash are called in-kind transfers. Standard measurements of the degree of inequality do not take account of these in-kind transfers. Because in-kind transfers ... poor evolve, the composi- tion of assistance between cash and in-kind transfers changes. Some of the fluctu- ations in the measured poverty rate, therefore, reflect the form of government assistance...

Ten Principles of Economics - Part 47

... effect tends to make the consumer buy more pizza and more Pepsi. Yet, at the same time, consumption of Pepsi has become less expensive rela- tive to consumption of pizza. This substitution effect tends ... the law of demand and buy more of a good when the price rises. To see how this can happen, consider Fig- ure 2 1-1 2. In this example, the consumer buys two goods—meat and potatoes. Ini- tially, ... fact a Giffen good during the Irish potato famine of the nineteenth century. Potatoes were such a large part of peo- ple’s diet that when the price of potatoes rose, it had a large income effect....

Ten Principles of Economics - Part 49

... Lightens Up 506 PART EIGHT THE DATA OF MACROECONOMICS CASE STUDY INTERNATIONAL DIFFERENCES IN GDP AND THE QUALITY OF LIFE One way to gauge the usefulness of GDP as a measure of economic well-being ... produced domestically, regardless of the nationality of the producer. 498 PART EIGHT THE DATA OF MACROECONOMICS “. . . IN A GIVEN PERIOD OF TIME.” GDP measures the value of production that takes place ... that for- eigners earn here. For example, when a Canadian citi- zen works temporarily in the United States, his production is part of U.S. GDP, but it is not part of U.S. GNP. (It is par t of Canada’s...

Ten Principles of Economics - Part 50

... RICE Q UANTITY P RICEOF Q UANTITY Y EAR OF M ILK OF M ILK H ONEY OF H ONEY 2001 $1 100 qts. $2 50 qts. 2002 $1 200 $2 100 2003 $2 200 $4 100 510 PART EIGHT THE DATA OF MACROECONOMICS a. Compute ... index (CPI) is a measure of the overall cost of the goods and services bought by a typical consumer. Each month the Bureau of Labor Statistics, which is part of the Department of Labor, computes and ... included in GDP. Can you think of how this might cause the numbers in the second column of Table 2 2-3 to be misleading in a comparison of the economic well- being of the United States and India?...

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Ten Principles of Economics - Part 1

... her part- time job for some extra spending money. scarcity the limited nature of society’s resources economics the study of how society manages its scarce resources CHAPTER 1 TEN PRINCIPLES OF ECONOMICS ... ideas. In the rest of this chapter, we look at Ten Principles of Economics. These principles recur throughout this book and are introduced here to give you an overview of what economics is all ... and Causes of the Wealth of Na- tions, was published in 1776, the exact year American revolu- tionaries signed the Declara- tion of Independence. But the two documents do share a point of view that...

Ten Principles of Economics - Part 2

... studying the short-run and long-run ef- fects of a change in the quantity of money. ECONOMIC MODELS High school biology teachers teach basic anatomy with plastic replicas of the hu- man body. These ... CHAPTER 1 TEN PRINCIPLES OF ECONOMICS 15 monetary and fiscal policy are potentially so powerful, how policymakers should use these instruments to control the economy, if at all, is a subject of continuing ... Throughout this book we will refer back to the Ten Principles of Economics highlighted in this chapter and summarized in Table 1-1 . Whenever we do so, a building-blocks icon will be displayed in the margin,...

Ten Principles of Economics - Part 3

... is not always straight- forward. This tendency is rooted in one of the Ten Principles of Economics in Chap- ter 1: People face tradeoffs. Economists are aware that tradeoffs are involved in most ... less of the other. When the economy moves from point A to point C, for instance, society produces more computers but at the ex- pense of producing fewer cars. Another of the Ten Principles of Economics ... just the sum of the activities of all these decision- makers in all these markets. The field of economics is traditionally divided into two broad subfields. Microeconomics is the study of how households...

Ten Principles of Economics - Part 51

... nominal and real interest rates often do not move together. S OURCE : U.S. Department of Labor; U.S. Department of Treasury. 524 PART EIGHT THE DATA OF MACROECONOMICS changes in interest rates, ... raises the price of its cars. Because Volvos are made in Sweden, the car is not part of U.S. GDP. But U.S. consumers buy Volvos, and so the car is part of the typical consumer’s basket of goods. Hence, ... deflator and the con- sumer price index show high rates of inflation. In the late 1980s and 1990s, both measures show low rates of inflation. 520 PART EIGHT THE DATA OF MACROECONOMICS QUICK QUIZ:...

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