Eco 360 Week One Chapter Summary
Chapter One
Chapter one consisted on defining economies and how economies affect as a whole. Coordination problems that an economy may face are what to produce, how to produce, and for whom. It also explained an economy’s cost/benefit framework which consist of sunk and opportunity costs. Sunk costs are costs that cannot be regained and opportunity costs is a planned or market economy. For example, every decision consists of an opportunity cost; time, money, raw materials. America’s economy is going through a rough patch that has people wondering whether or not America will go into a recession. Forces of scarcity in economics give rise to the concept of opportunity cost but market forces ration prices. The market forces play a part in the rates set by the FED. The main concern of the FED is to balance inflation and growth of the economy; if growth is too high and inflation rates spike, then higher rates lower down. A perfect example would be in the housing industry. Two years ago interest rates were high because the demand for houses was high. Now, interest rates for home loans are very, very low because no one is buying houses. The chapter explained how economics can be divided into microeconomics and macroeconomics. Macroeconomics refers to world and national economic factors, government regulations, laws, interferences, gross national products and trade balances. Microeconomics focuses on smaller groups such as a particular industry, a corporation, or a class of workers.
Chapter Three
Chapter three recapped on a market economy which is a system based on a private property and the market and solves the what, how, and for whom problems (Colander, 2006). All aspects of the U.S economy is based on Market economy. For example, in a free market, the producer or the consumer relationship will dictate the fluctuation of value of the monetary system. The chapter also discussed on socialism, capitalism, and feudalism. Socialism has many aspects...
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