Okun’s Law pertains to the relationship between the U.S. economy’s unemployment rate and its gross national product (GNP). It states that when unemployment falls by 1% GNP rises by 3%.
The Philips curve is an economic concept developed by A.W.Philips stating that inflation & Unemployment have a stable and inverse relationship.
The Standard of Living depends on a Country’s production Differences in the standard of living from one country to another are quite large. Changes in living standards over time are also quite large. The explanation for differences in living standards lies in differences in productivity. High productivity implies a high standard of living. Thus, policymakers
There are two broad reasons for the government to interfere with the economy: the promotion of efficiency and equity. Government policy can be most useful when there is market failure. Market failures occur when the market fails to allocate resources efficiently. Governments can step in and intervene in order to promote efficiency and equity.
Many countries that once had centrally planned economies have abandoned this system and are trying to develop market economies. Market prices reflect both the value of a product to consumers and the cost of the resources used to produce it. Centrally planned economies have failed because they did not allow the market to work. Adam
Trade is not like a sports competition, where one side gains and the other side loses. Consider trade that takes place inside your home. Your family is likely to be involved in trade with other families on a daily basis. Most families do not build their own homes, make their own clothes, or grow their
Incentive is something that causes a person to act. Because people use cost and benefit analysis, they also respond to incentives Example: If your family offered that if you top the exam you will get a bike. Higher taxes on cigarettes to prevent smoking
Economists generally assume that people are rational. Many decisions in life involve incremental decisions: Should I remain in school this semester? Should I take another course this semester? Should I study an additional hour for tomorrow’s exam? Rational people often make decisions by comparing marginal benefits and marginal costs. Example: Deciding on whether you are going
Because people face trade off, making decisions requires comparing the costs and benefits of alternative courses of action. Opportunity cost is whatever must be given up in order to obtain some item or last best alternative forgone. Example: The opportunity cost of going to college is the money you could have earned if you used that