ECON

• Economic Problem


  The fundamental challenge facing all societies, which is how to satisfy unlimited wants and needs with limited resources
• Three Basic Economic Questions

  1. What to produce?

  2. How to produce?

  3. For whom to produce?
• What to produce?


  Every economy must determine what goods and services are to be produced and in what quantities of each to produce
• How to produce?


  The company must decide on how to use the resources to produce goods and services
• For whom to produce?

  Goods and services will be distributed to buyers based on their ability and willingness to pay its existing market price
• Economic Issues


  Economic priorities, risk and problems. These are inherently political as people have different economic priorities and views
• Most pressing economic issues

  • Inflation
  • Poverty
  • Economic Inequality
  • Trades and Foreign Policy
  • Labor, Unemployment and Migration
• Macroeconomics


  The branch of economics that studies the behavior and performance of an economy as a whole. It focuses on the aggregate changes in the economy such as unemployment, growth rate, gross domestic product, and inflation
• John Maynard Keynes


  Known as the founder of Keynesian economics and the father of modern macroeconomics, the study of how economies—markets and other systems that operate on a large scale—behave
• Keynesian Economics


  A macroeconomic theory of total spending in the economy and its effects on output, employment, and inflation
• The Great Depression

  The greatest and longest economic recession in modern world history, running between 1929 and 1941
• Inflation


  Increase in the prices of goods and services
• Consumer Price Index (CPI)


  Measure of the percentage change in the price of a basket of goods and services consumed by households
• CPI calculation


  1. Take price changes for each item in the predetermined basket of goods

  2. Average them based on their relative weight in the whole basket

  3. Consider the retail prices of each item
• Causes of Inflation


  • Demand Pull Inflation (increase in aggregate demand, supply remains same or decreases)
  • Cost Push Inflation (increases in the cost of wages and raw materials)
• Fiscal Policy


  Use of government spending and taxation to influence the economy
• Monetary Policy


  Set of tools used by a nation's central bank to control the overall money supply and promote economic growth
• Fiscal Measures to Control Inflation

  • Reduction of Unnecessary Spending/Expenditure
  • Increase in Taxes
  • Increase in Savings
  • Reduce Public Debt
• Monetary Measures to Control Inflation

  • Credit Control
  • Demonetization of Currency
  • Issue of New Currency
• Other Measures to Control Inflation

  • Increase Production
  • Wage Policy
  • Price Control
• Types of Inflation


  • Creeping Inflation (less than 2%)
  • Walking Inflation (around 5%)
  • Running Inflation (10%)
  • Galloping Inflation (25%)
• Economic Inequality


  The unequal distribution of income and opportunity between different groups in society
• Disparity


  A noticeable and usually significant difference or dissimilarity
• Inequality


  The quality of being unequal or uneven
• Privilege


  Refers to a person with wealth and is considered as part of the upper class in the society
• Possible causes of Inequality

  • Educational Attainment
  • Socioeconomic Status
  • Corruption
• The top 1% controls 46% of worlds wealth
• Economic Inequality


  • Wealth
  • Asset
  • Physical Environment
  • Opportunity
  • Gender
  • Income
• Income Inequality


  The disproportionate distribution of total national income among households
• Types of Income Inequality

  • Vertical Inequality (difference between the rich and the poor)
  • Horizontal Inequality (where people of similar background, status, qualifications, etc. have differences in incomes)
• Causes of Income Inequality

  • The Labor Market (differences in education, qualifications, skills, abilities and experience)
  • The Tax System (impact of taxes that may be regressive in their effect, ability of some to be able to exploit the system to pay less tax)
  • Education (level of education and access to education influences the level of earnings)
• Inequality of Opportunity


  A consequence of the differences in circumstances that are beyond the control of a person, and it is significant from the standpoint of social justice
• Causes of Inequality of Opportunity

  • Discrimination (based on race, ethnicity, gender, etc.)
  • Access (how easy is it for individuals to access education, work, housing, etc.)
• Physical Environment


  Can include natural resources, raw materials and climate. Natural climatic factors are at the heart of a large amount of inequality – it is not coincidence that countries with an equitable climate are the most economically developed. Natural climate and climate change tend to affect those countries least able to help themselves
• Labor


  Physical or mental effort especially when hard or required
• Gender Inequality


  The social phenomenon in which people are not treated equally based on gender. This inequality can be caused by gender discrimination or sexism
• Labor force


  The number of employed plus the unemployed
• Evidence of Gender Inequality

  • Women still paid less than men for the same job
  • Some countries actively discriminate against women
  • Men still dominate positions of power and responsibility
  • 'Glass ceiling' – limits the extent to which women can make it to the top
• Unemployment


  A condition where individuals actively seek employment but are unable to find it, indicating a significant economic health issue
• Personal Distribution of Income

  The distribution of income according to size class of persons