Economic questions Essay

1. It has to do with game theory. In the pris angiotensin converting enzymers dilemma, two suspects are taken by the police and all(prenominal) told apiece that they can gain their freedom by testifying against each other. If nevery testifies, they each result run a six months sentence. If one testifies the other waistband silent, the one will go free and the other will cause 10 yrs. If both testify then both will serve 5 yrs. The beaver thing is for both to be silent, but the much likely scenario is that each, fearful of a long sentence, bails on the other and goose egg wins. In economics it is the investors hoping to ride the high flyers into the New Year the best outcome is for nobody to sell. Most years, that is how it works and year end rallies channel everyone satisfied.2. Economic theory. Through regulation is the best way market harm or externalities are dealt with when they are harmful to society. Externality is an economic face effect. They are the costs or benef its that come from economic activities that affect others than the individuals that re engaged in the economic activities. Some solutions are negative- taxes, positive-subsidy.3. Sources of income in a capitalist thrift would be their property rights that entitle them to earn a profit for the use of their capital as risk in slightly form of economic activity. They would be related through dig up by human capital. The knowledge and skill acquired by labor through reading and labor.4. The step is determined by a percentage of its turnover or sales.5. Investment is something investors decide how much they will spend on pertly enthronement. Example Producers have to decide whether to replace used up or obsolete machinery, whether to expand production these costs will become an enthronement that in turn should make them money. There are four brain determinants of autonomous investment, the train of technology, rate of interest, expectation of future economic harvest-festival and the rate of capacity utilization.6. With an equilibrium price. The price that equates quantity demanded to quality supplied. If any disturbance from that price occurs, excess demand or excess communicate emerges to drive price back to equilibrium.7. The classical view of how our parsimoniousness behaves is this If the economy were left on its own without the interference of government or the Fed. It would melt down towards an equilibrium rate of step-up that would produce with only minor interruptions, in full employment without inflation. This hands off rests upon two simple propositions about market, one that all markets are basically competitive and two, all prices are flexible upward and downward approaching equilibrium. Unemployment is only a temporary check over caused by wage rates climbing above the equilibrium rate. A shift in the extraction curves is the economys rate of unemployment and rate of inflation.8. Supply-side economists emphasize the importance of re ducing tax rates. They accept the Keynesian belief that cut back tax rates will join on consumer demand, but they take a to a greater extent important consequence is the added incentive it provides suppliers. For example lower corporate tax rates increase after tax profit, which induces suppliers to increase aggregate grant. Lower income tax rates encourage more passel to work longer, adding as well to aggregate supply.9. Savings automatically converts to investment so that investment induced growth is dependent on saving.10. The member of labor into specialized activities that allow individuals to be more productive. The idea that labor productivity is a function of the compass point of labor specialization.11. Upward incline trend cutting through the cycle traces the economys yield performance over the course of a business cycle, measured either from recession to recession or from prosperity to prosperity. The upward sloping eccentric of the trend line signifies economic growth.12. Every economy, whatever its level of matter income, includes people earning different incomes. Knowing someones absolute income tells us little about that persons income status.13. white plague spending is root in Status. High income people not only consume more goods and services than others, but also set consumption standards for everyone else.14. mass supply is the total supply of goods and services that all firms in the study economy are willing to offer at varying price levels. Aggregate demand is the total quantity demanded of these goods and services by households, firms, foreigners, and government at those varying price levels. Macroequilibrium is puddle when aggregate supply equals aggregate demand.15. Consumption spending has tended to be more stable than investment spending in the past. MPC can be counted on to remain pretty much un alternated. supreme consumption is hardly likely to change. Investment spending is considered volatile. Economists identify changes in aggregate expenditure as the key to understanding why national income changes. Changes in investment have highly magnified effects on national income. The income by which income changes as a result of a change in aggregate expenditure is called income multiplier.16. The economys output or gross domestic product is the total value, measured in contemporary market prices, of all final goods and services produced in the economy during a given year.17. One solution is to combine wage and price controls with a Keynesian style job creating policy. Stabilization policy is one option.18. quartet principle factors contributing to a nations economic growth, the size of the labor force, the degree of labor specialization, or the division of labor, the size of its capital stock and the level of its technology. Savings automatically converts to investment so that investment induced growth is dependent on savings.19. Demand deposits are only half of a banks business. Loans are the o ther. The bank makes a profit only on the loans it provides, not on it deposits. Borrowers benefit from inflation where lenders, where as lenders lose money.20. Through the rotary flow model, how the economys resources, money, goods and services flow between households and firms through resource and product market.21. Economies with negative balances on incumbent account will find their tack rate falling. And unless these rates are propped up by government intervention, they will fall to stem the currency outflows exist the exchange rate will keep falling. Eventually the rate will reach the level appropriate to a zero balance on current account. It takes only time. He would think we were habitual borrows.22. They are the what is and what it should be23. zippo because the infrastructure is what an economys ability for development depends upon. Such as with education to educate people involves not only the task of getting compliance but the funds needed to build the school and s upply them.