American Heritage Final Exam
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Students also studied
Econ knoweldge Macro - Measuring Economic activit... ECWII Lecture 2 econ a
132 terms 17 terms 19 terms 84 terms
arianna_barraza6 Preview tosackermann Preview loloker Preview Nin
List all the founding principles The Good Society
Freedom/Virtue/Welfare
Rule of Law
Market Economics
The Declaration of Independence
What are the differences between our nation at the time Agricultural and Rural --> Urban
of the founding and today? Large Families --> Small Families
Little Formal Education --> Education Crucial
Low Life Expectancy --> High Life Expectancy
Largely Christian Believers with Common Moral View --> Diverse Religious Views
with Growing Minority of Non- Believers
Low Levels of Ethnic and Racial Diversity (+ Slavery) --> High Levels of Ethnic and
Racial Diversity
Concentrated on Eastern Seaboard --> Stretch from Coast to Coast
What are the implications questioning as a result of deep How do these changes affect our understanding of the Constitution? Specifically,
change in our nation? what role, if any, should government play in the economy?
List all the market weaknesses ✤ Imperfect Information
✤ Monopoly
✤ Public Goods
✤ Externalities
✤ Economic Instability or Recession
✤ Economic Injustice
What are the three questions we need to ask when 1. Problem: What is the source of the market breakdown?
analyzing market weaknesses? 2. Intervention: What could government do to correct the problem?
3. Evaluation: How successful is government intervention likely to be?
Unintended consequences?
, Describe imperfect information ✤ Because they do not have complete or correct information, parties make
exchanges that might be harmful.
✤ The value/cost of the good is not accurate.
✤ Both parties are not better off
what are possible government responses to imperfect ✤ Use the courts to recover damages
information? ✤ Require information labels and warnings
✤ Control production and marketing of goods
What are the challenges of government intervention in they can prevent good exchanges from happening - like the example of FDA,
relieving imperfect information? maybe lives could be lost
Describe monopoly and the problems? ✤ A monopoly can exercise significant control over prices because
it has exclusive control over production.
Inequality: Monopolist receives greater benefit from exchange
and can amass great wealth.
✤ Inefficiency: exchanges are restricted because of price
What are possible government responses to ✤ Government may regulate economically powerful firms, forcing them to
monopolies? price their products and behave like competitive firms.
✤ Example: Local utility company.
✤ Government may take action to foster competition in order to eliminate
the economic power of firms.
✤ Example: FCC decisions on exclusive cable TV deals for apartment
complexes.
What are the challenges of government intervention in ✤ Differences in interests
relieving monopolies? ✤ Businesses have powerful incentives to lobby regulatory
agencies. Individual consumers have relatively small stakes
(and thus a collective action problem).
✤ Antitrust laws
✤ Court cases can be expensive, time-consuming
What is a recession? ✤ Definition: "a significant decline in economic activity spread across the
country, lasting more than a few months ..."
✤ National Bureau of Economic Research Business Cycle Dating
Committee
✤ Great Depression lasted 43 months
✤ Previous post-WWII recessions have lasted from 6 to 16 months
(average: 10 months)
Why do recessions occur? ✤ A negative "shock" hits the economy
✤ Example: stock market correction, oil price increase, bank panic, etc.
✤ If wages and prices adjust downward quickly, full employment is preserved and
output
stabilizes
✤ But contracts, inertia, and other forces (government policies?) prevent quick
adjustment of wages and prices
✤ Output falls and resources are unemployed, including labor
✤ Recovery takes place as wages and prices adjust
Save
Students also studied
Econ knoweldge Macro - Measuring Economic activit... ECWII Lecture 2 econ a
132 terms 17 terms 19 terms 84 terms
arianna_barraza6 Preview tosackermann Preview loloker Preview Nin
List all the founding principles The Good Society
Freedom/Virtue/Welfare
Rule of Law
Market Economics
The Declaration of Independence
What are the differences between our nation at the time Agricultural and Rural --> Urban
of the founding and today? Large Families --> Small Families
Little Formal Education --> Education Crucial
Low Life Expectancy --> High Life Expectancy
Largely Christian Believers with Common Moral View --> Diverse Religious Views
with Growing Minority of Non- Believers
Low Levels of Ethnic and Racial Diversity (+ Slavery) --> High Levels of Ethnic and
Racial Diversity
Concentrated on Eastern Seaboard --> Stretch from Coast to Coast
What are the implications questioning as a result of deep How do these changes affect our understanding of the Constitution? Specifically,
change in our nation? what role, if any, should government play in the economy?
List all the market weaknesses ✤ Imperfect Information
✤ Monopoly
✤ Public Goods
✤ Externalities
✤ Economic Instability or Recession
✤ Economic Injustice
What are the three questions we need to ask when 1. Problem: What is the source of the market breakdown?
analyzing market weaknesses? 2. Intervention: What could government do to correct the problem?
3. Evaluation: How successful is government intervention likely to be?
Unintended consequences?
, Describe imperfect information ✤ Because they do not have complete or correct information, parties make
exchanges that might be harmful.
✤ The value/cost of the good is not accurate.
✤ Both parties are not better off
what are possible government responses to imperfect ✤ Use the courts to recover damages
information? ✤ Require information labels and warnings
✤ Control production and marketing of goods
What are the challenges of government intervention in they can prevent good exchanges from happening - like the example of FDA,
relieving imperfect information? maybe lives could be lost
Describe monopoly and the problems? ✤ A monopoly can exercise significant control over prices because
it has exclusive control over production.
Inequality: Monopolist receives greater benefit from exchange
and can amass great wealth.
✤ Inefficiency: exchanges are restricted because of price
What are possible government responses to ✤ Government may regulate economically powerful firms, forcing them to
monopolies? price their products and behave like competitive firms.
✤ Example: Local utility company.
✤ Government may take action to foster competition in order to eliminate
the economic power of firms.
✤ Example: FCC decisions on exclusive cable TV deals for apartment
complexes.
What are the challenges of government intervention in ✤ Differences in interests
relieving monopolies? ✤ Businesses have powerful incentives to lobby regulatory
agencies. Individual consumers have relatively small stakes
(and thus a collective action problem).
✤ Antitrust laws
✤ Court cases can be expensive, time-consuming
What is a recession? ✤ Definition: "a significant decline in economic activity spread across the
country, lasting more than a few months ..."
✤ National Bureau of Economic Research Business Cycle Dating
Committee
✤ Great Depression lasted 43 months
✤ Previous post-WWII recessions have lasted from 6 to 16 months
(average: 10 months)
Why do recessions occur? ✤ A negative "shock" hits the economy
✤ Example: stock market correction, oil price increase, bank panic, etc.
✤ If wages and prices adjust downward quickly, full employment is preserved and
output
stabilizes
✤ But contracts, inertia, and other forces (government policies?) prevent quick
adjustment of wages and prices
✤ Output falls and resources are unemployed, including labor
✤ Recovery takes place as wages and prices adjust
