Economics
Macroeconomics
Microeconomics
Production Possibility Curve 
Marginal analysis
an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.
The law of diminishing marginal utility is a law of economics stating that as a person increases consumption of a product while keeping consumption of other products constant, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.
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Law of Demand: at lower prices people buy more, at higher prices people buy less
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Law of Supply: higher prices people choose to produce more, lower prices people choose to produce less
Demand = willingness and ability to buy something
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Demand Shifters
change in population of available consumers
change in income: normal- as income goes up, so does demand, inferior- as income goes up, demand goes down
price of other goods, complements- goods that are used together - pb and j, substitutes - peanut butter vs almond butte
future expectations about price- most people react in a predictable way
consumer information
tastes and preferences
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Demand Curve- how much of something people want at a specific price
Supply Curve - how much of a good would be supplied or produced at each possible price
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Supply Shifters
cost of production
government policy - tax and subsides
shortage of inputs
technological change
number of producers/sellers in an area
producers rise = supply will rise
future expectations about price
Elasticity of Demand - we want to know how steep our demand curve should be
how responsive demand is to change in price
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Elasticity clues:
Substitute?
if there are lots of options than it would be elastic
brand name loyalty
necessity vs luxury
consumer’s budget
time horizon
how long time to adjust is
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Gross Pay: amount of money paid before deductions
mandatory - gov taxes
for things like military, medicare, and social security
marginal taxation-
voluntary deductions - health care, union, life insurance
FICA- federal insurance contribution tax
Net Pay - what people actually make after deduction
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GDP- gross domestic product
C+I+G+NX
C - consumer spending - durable vs non durable goods
I - business investment
G - government spending - not transfer payments
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NX - net exports
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What is left out of GDP?
does not include illegal activities
does not include non market activities
does not include secondary sales
does not count buying stock
does not include intermediate ingredients and outsourcing
Government sectors
primary, secondary, tertiary
Unemployment
Frictional Unemployment - between jobs, middle stage, transition in life
Structural Unemployment - your job is obsolete in economy
Cyclical Unemployment - caused by recession
Recession- 2 consecutive quarters of declining GDP
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Government Recession Tool Kit
Fiscal Policy: changes to taxes and spending money
this is done by congress and the president
Monetary Policy: changes to supply of money
the Federal Reverse does this
do this by changing interest rates and other ways of encouraging spending
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Keynes- recession is caused by animal spirits and the logic of paradox and thrift
hold on to our cash and don’t take risks when we get afraid
markets therefore need to be steered by government
Hayek - government actions make recessions worse
basically a super high when one is hungry
market will readjust itself on its own
he was against Fiscal and Monetary Policy
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fiat money: the currency used has nothing standing behind it except the fact of legal tender, what US uses
gold standard: the money was backed by gold
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Federal Reserve - central bank of the united states, it controls the money supply
it is not under current political control
7 governors, with 14 year turns
also supervise all banks, credit unions, etc
it is technically a bank for banks
12 branches around the country of the Fed
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The Fed job is to adjust the supply of money in order to accomplish:
maximum employment
stable prices- no inflation/deflation
moderate long term interest rates
Fed Chairs - one of seven governors that leads the federal reserve
is sometimes appointed by executive branch depending on opening
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Policy Tools of Federal Reserve
adjust the reserve requirements for depository institutes
if requirement is lowered there will be less money in the economy bc more will be deposited
adjust interest rates
the discount rate - rate the fed charges other banks
federal funds rate- the amount of interest banks must pay when loading money to each other
open market operations- federal bank borrows money through treasury bonds
fed has never not payed someone back, very safe investment
anyone can buy a treasury bond, but china owns a majority of them
Factors of Production
-land, labor, capital
Nudge
Libertarian Paternalism- affect behaviors while sill respecting freedome of choice
Treasury Bond - government bond
Mortgage: bank lends money for property purchases- fixed rate, subprime, adjustable
Credit Default Swap- insurance insurance on buyers potential losses
Behavioral Economics
Positive Incentives - something that motivates you to do something
Negative Incentives- something that motivates someone not to do something
Perverse Incentives- undesirable unintended results from incentive