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ECONOMICS (Macroeconomics: big picture- scaled and more general economic…

- - - - Status Quo Bias: a preference for the current state of affairs
        
        Overconfidence/Optimism Bias: a person's subjective confidence in his or her judgment is reliably greater than the objective accuracy of those judgement, especially when confidence is relatively high.
  - - - Dual Mandate: Practice in which elected officials serve in more than one elected or other public position simultaneously.
      - Fractional Reserve Banking: a bank accepts deposits, makes loans or investments, but is required to hold reserves equal to only a fraction of its despite liabilities. Currency in the bank , or as balances in the bank's accounts at the central bank.
        
        Money Supply: the total amount of money in circulation or in existence in a country.
      - FED: operates as banks of the banks. If you have too much money, it goes to bank and then bank transfers into the FED. twelve branches. adjusts to the supply of money in order to accomplish these goals.
        
        Stable prices (no inflation or deflation)
        
        Moderate long term interest rates
        
        Maximum employment
      - 3 tools
        
        Adjust interest rates
        
        Federal Funds: amount of rate they charge each other (other banks). Sets the interest rates.
        
        Discount Rate: rate of interest that the FED charges when it makes loans to banks. LOW rate of interest. Lowers the rate= more banks borrow money
        
        Open Market Operations: buying or selling treasury bonds. Anyone can buy them. you pay us, we pay you back BUT with interest
        
        $80 billion a month of treasury bonds
        
        Bonds: a government bond issued by the US treasury.
        
        Credit Default Swap: where a buyer is in debt in the form of bonds tries to eliminate possible loss that could arise from default by the issuer of the bonds.
        
        Reserve Requirement for institutions: If it is lowered, banks have more money to loan/inverst. To decrease money supply, FED would rise the requirements
    - - Unemployment insurance
      - Increasing food stamps
    - - Hayek
        
        borrowing money is cheap
        
        government actions Fiscal and monetary) make recessions worse. They want to prevent natural functioning of markets
        
        government needs to Get out!
      - Keynes
        
        Boost demands
        
        cheap money
        
        Recession caused by "animal spirits"
        
        Paradox of thrift: individuals try to save more during an economic recession, which essentially leads to a fall in aggregate demand and hence in economic growth
        
        bull vs bear. paradox of thrift: markets steered by government (boom and bust)
        
        emotional paths we go on
      - Fear and Confidence Fairies: "animal spirits"
        
        Confidence: criticism that cutting government spending will lead to renewed confidence and economic recovery.
        
        Fear: cutting the number of public employees would send highly skilled workers job hunting in the private sector, which in turn would lead to lower labor costs and increased employment
    - - consumption goes down
      - production
      - less income
      - employment
      - business investment goes down
    - - Government (sets interest rates
    - - Central Bank
      - Monetary Policy: change to the supply of money
      - Expansionary
  - - - Marginal Tax rates/Brackets: can fall into seven different brackets depending on their taxable income
      - FICA taxes: three separate taxes from the wages you pay your employees
        
        FICO Score: a person's credit score
        
        FICA: federal insurance care act: creates a payroll tax requiring a deduction from the paychecks of employees as well as a contribution from employers to fund...
        
        Social security
        
        Medicare
      - state taxes: 4.63%
      - Fixed rate mortgage: interest rate on the note remains the same throughout the term of the loan
        
        Sub-Prime and Adjustable Rate Mortgage: lending institution to borrowers with low credit ratings
        
        Sub-Prime: is a type of loan granted to individuals with poor credit scores. Below a score of 600
        
        Adjustable rate: mortgage loan with the interest rate periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets
        
        Mortgage backed Security: secured by a mortgage or collect of mortgages. Sold to groups of individuals that packages the loans together that investors can then buy.
        
        Collaterilzed Debt Obligation: developed as instruments for the corporate debt markets. Promise to pay investors in a prescribed sequence
      - 70% goes to medicare, military, and social security
    - - What gives it value: fiat money (paper money made by government decree. Backed by strength of the doc that issued it)
        
        Gold Standard: money value of currency that was backed by gold and silver
    - - Voluntary
      - mandatory
  - - - B) The secondary sector: processing raw materials acquired through primary activities into finished products of greater values
        
        Factories
        
        Manufacturing
      - C) The tertiary Sector: moving selling, trading products made in primary and secondary activities
        
        Service jobs
        
        banks
        
        fast food
        
        Stores
      - A) The primary Sector: activities revolving around getting RAW materials from the earth
        
        mining
        
        fishing
        
        Farming
      - D) The Underground Sector (not all illegal activities) the illegal production of goods and services
        
        drug dealing
        
        prostitution
        
        sports betting
        
        foods/services
        
        babysitting
        
        lawn mowing
  - - - Inflation is making costs go UP
      - Consumer Price Index: monthly measure
    - - production-growth
      - per capita
      - Nominal and Real GDP
      - the total market value of all goods and services PRODUCED in a country over the period of 1 year
    - - secondary sales
      - transaction that are financial
      - the value of non marker activities
      - intermediate goods and services- used in process of production
      - illegal activities
- - - - Pint outside graph: an impossible point to reach with resources
      - Point inside the graph:inefficiency given available resources
  - - - Positive: something you gain
        
        good practical outcomes
        
        incentives
        
        better behavior
        
        consent
      - Negative: consequences
        
        inequality/fairness
        
        valuing things in the wrong way
        
        Perverse incentives
        
        exploration/power unbalanced
  - - - Opportunity cost: the loss of potential gain from other alternatives when one alternative is chosen
    - - Diminishing marginal utility: as a person increases consumption of a product while still keeping consumption of other products
- - - - Positive Externalities: marginal social benefit exceeds the marginal private benefit.
        
        negative Externalities: when certain goods are consumed, such as demerit good.
    - - Market Equilibrium: when there is o surplus or shortage. A good balance and in the middle.
        
        Price equilibrium: quantity of goods supplied is equal to the quantity of goods demanded
        
        Shortage: the area below the equilibrium. when there is not enough
        
        Surplus: the area above the equilibrium. when there is too much
      - Supply/demand Shifters
        
        supply shifters
        
        costs of production: how much you are willing to supply
        
        decrease cost: shift right
        
        resources and ingredients used to produce a good
        
        government
        
        shortages
        
        subsidies
        
        labor
        
        increased costs: shift to the left
        
        Technological Change: improves technology can make produciron easier and faster. More can be produced at each cost.
        
        Increase supply: shift to the right
        
        Decreased supply: shifts to the left
        
        Number of producers/sellers in an area: if the number of seller rises, supply will rise. If the number of sellers decrease, supply will also decrease
        
        Future expectations about prices
        
        Stock piling: if supplier expects the price of their good to rise in the future, they want to store some supply to then sell it later and reap a higher profit (decreasing supply now, increasing later)
        
        Demand Shifters
        
        Prices of other goods
        
        Complementary goods: an increase in price of one complement leads to a decline in demand for another
        
        Substitute goods: demand for a good can be affected by products that can be used instead of that good
        
        Future Expectations about Price: most people react to expectations about price changes in a predictable way
        
        Change in income
        
        Normal Goods: if demand curve shifts to the right as income increases. They want more
        
        Inferior Goods: when you don't want a product anymore. Demand falls as income increases
        
        Consumer Information: The amount of information available to consumers when they make their purchases is a part of their demand decisions
        
        Good reviews: curve to the right
        
        Bad Reviews: curve to the Left
        
        A change in the population of available consumers- the price doesn't change, but the consumer does
        
        Tastes and Preferences: as consumers come to know and like a product, demand for it will increase. Shifts to the right
        
        As tastes and preferences change, old products will go out of favor and it will shift to the left
      - Law of Demand: at lower prices, people choose to buy more. At higher prices, people choose to buy less. (somebody's willingness and ability to buy something)
        
        Law of Supply: At higher prices, people choose to produce more. At lower prices, people choose to produce less.
    - - Values exactly 1- Unit Elasticity
      - % change in quantity= original #- new#/ original #
      - Calculating Price (PED): PED= %change Q/% change P
      - Any number that is greater than 1
      - Any number less than 1