basic economics part 5 (The National economy)

Under what conditions is the burden of the national debt passed on to future generations? Under what conditions is it not? (pages 437-438)

it's the next generation inherits the bonds then the would receive the the debt and the investment returns to pay the debt , in other words, no debt will be transferred to the next generation. however, if the older generation sells it bonds to other people or turns it in to the government to cash in; then only the debt of the bond will get pass down to the next generation and not the investment returns.

standard of living

level of economic prosperity

Does the presence or absence of property rights make any difference to people who own no property? For example, are tenants affected economically by whether the community in which they rent apartments or houses allows unbridled property rights or reduces those property rights through zoning laws, open space laws, height restrictions on buildings, or rent control laws? (pages 400-404)

property rights matter to those who have no property at all because private property rights give producers incentives to provide good products and services to the public when property rights are impeded upon, it has disasterous consequences. It affects the quality and quantity of the desired good or service When you apply rent control, zoning laws and other regulations that disrupt the housing market, it leads to lower quality and quantity of housing

How does the consumer price index tend to exaggerate the rate of inflation and how does that affect our attempts to measure real income? (pages 353-355)

the consumer price index tend to exaggerate the rate of inflation by measuring the cost of living. this causes inflation bias because the items people had between generations and the prices of those items fluctuate over time. these fluctuations can give the appearance of incomes going down

Explain "the fallacy of composition" and give economic examples. (pages 346-347)

the fallacy of composition is the mistaken assumption that what applies to a part applies automatically to the whole. one example of the fallacy of composition is the booming Economy of the 1990s. several sectors of the economy in the 90s had massive layoffs, However the economy as a whole had massive success , showcased through it's low employment rate Another example of the fallacy of composition would be adding up all individual investments to get the total investments of the country. the total wealth of a country does not represent the wealth of the individual.

the fallacy of decomposition

the opposite of the fallacy of composition. what true of the parts is not true of whole.

Why would an Albanian bank, with 83 percent of the country's bank deposits, refuse to make any loans? And what were the consequences for the Albanian economy? (page 387)

then try to loan money to private businesses in a way that gives them returns and minimizes loss. the legal infrastructure for banks of Albania was weak. so they opted to put their money in government securities instead. government securities give a small but reliable returns.

In medieval times, the British economy lagged behind that of some economies in continental Europe but, in later centuries, Britain had the leading economy in Europe and led the world into the industrial age. How and why did foreigners play a major role in developing the British economy? (page 398)

Britain had a reliable framework of laws which made it attactive to domestic and foreign investments. which then became very attractive not just for business enterprises but immigrants with valuable human capital (valuable skills) . immigrants then took that human capital and created new profitable industries

From time to time there are conflicting estimates of how much of the total taxes are paid for by various individuals and organizations. Why is it not easy to tell who is really bearing the burden of taxation? Explain with specific examples. (pages 428-432)

Since each individual pays a mixture of progressive and regressive taxes, as well as taxes that apply to some goods and not to others, it is by no means easy to determine who is actually paying what share of the country's taxes. Social Security taxes are likewise regressive, since they apply only to incomes up to some fixed level, with income above that level not being subject to Social Security taxes. Income taxes, on the other hand, exempt incomes below some fixed level.

How does the level of honesty or corruption in a country affect the effectiveness of its economy? How do economic policies affect the level of honesty and corruption? (pages 394-396)

a country with high corruption tends to have high poverty in even countries with rich natural resources. foreign investment would a few and far between because corruption would eat their profits. if economic policies are shaped so that only those who are corrupt get ahead, when corruption will be widespread such as in the form of bribery

Since "money talks" in the marketplace, why would rich people want to shift some decisions out of the marketplace and have these decisions made politically or by the courts? (Hint: housing is a classic example.) (pages 402-403)

because it benefits them. place zoning laws and other laws the interfere with property rights. in order to keep the market value of property that they already own high.

Even if detailed statistics are available, why is it difficult to compare the national output at the beginning of the twentieth century with the national output at the beginning of the twenty-first century, and say by what percentage it has increased? Why is it hard even to say how much prices for particular goods have increased from one century to another? (pages 352-354)

because of the price fluctuations between each century. Some things in the 20th century went down in the 21st century, such as TVs. Due to technological advances some things also in the twentieth century went up in a 21st century such as cars

Why is it difficult to make meaningful comparisons between the standard of living in a country whose population is, on average, many years younger than the population of another country with which it is being compared? (page 356)

comparing levels of economic prosperity among older and younger countries are difficult because the both possess attributes that can skew data in the other's favor. older countries may have a financial leg up due their them Being established longer than younger countries., but also have an older population. younger countries may not have as much fiscally as older countries, however they have youth by their side. their older population is much less.

Those who favor increases in tax rates are often disappointed that the additional revenue turns out to be less than they expected. Conversely, those who fear that cuts in tax rates will substantially reduce the government's revenues have often been surprised to find the government's revenues rising. Explain both phenomena. (pages 426-428)

government cannot control or predict tax revenue. they can only have a controlling hand in The tax rate. the public reactions to changing tax rate in often opposite of what was forecasted when taxes are raised, the public do not participate in the marketplace. They don't invest or participate in the marketplace because most of their money taken by government when taxes are lowered, the expectation is that tax revenue will decrease, however throughout history, the opposite has happened. when people understand that they will be able to keep most of their money they earn , they invest and participate in the marketplace more

During a period of inflation, does money circulate faster or slower—and why? What are the consequences? What do you suppose happens during a period of deflation—and what are the consequences then? (pages 370-374)

money during inflation circulates faster. The reason is that there is more money chasing the same number of goods. Therefore, the increase in monetary demand causes firms to put up prices the value of goods and services go down during deflation. the consequences are that the profits producers make from goods and services declines as well as the wages of employees.(ex. the 2007-2008 recession)

During the Great Depression of the 1930s, both Republican President Herbert Hoover and his successor, Democratic President Franklin D. Roosevelt, tried to keep up the prices of goods and labor. What was the rationale for these policies and what are the economic and social problems with such policies? (pages 375-376)

the rationale to keep to keep prices high is to please a particular political voting group, such as when the government destroyed excess amounts of produce in order to keep prices high for farmers. some of the economic and social problems that can with this rice disposing of excess produce during the depression, which was a time in which food was scarce

During an all-out war, how can a country's military consumption plus civilian consumption add up to more than its output, without borrowing from other countries? (page 351)

when consumption exceeds the output of a country one way to sustain not without borrowing money just to live off the country's wealth of the past (Ex. in WWII , car companies would make military equipment instead of cars. so the consumer would use up all the cars made pre-war)