What makes the Economy
C stands for consumer; I for investment and G for spending.
Economic Systems: capitalism, communism, socialism, mixed
Communism: big in 1917-1991, then collapsed, but it still exists in Cuba,
Vietnam, and North Korea.
4 kinds of markets:
Most dominant market, open market, nobody controls price, and products
are similar with some differentiations.
1880-1932 was when it was most dominant. After the Anti-Trust Law,
monopolies were prohibited. In a monopoly, there is one seller, it is a
closed market and there is price control.
Monopolistic Competitions (mix between pure competition and monopoly):
100-120 firms exist in the industry and it is differentiated: trademarks are
most dominant in the market, chemical compositions (Chevron adds
Techron), services (you pay for service). Markets are semi-closed.
Few giant corporations (between 4-9), prices are fixed by the corporations,
and the market is semi-blocked.
International Trade and Finance
Cheaper labor if a product is not made in America, so most American products
are not made in America and we import instead.
1776: Adam Smith published The Wealth of Nations
, which asked how a country can go from
being poor to developed.
-Factors for production: need capital, develop skilled labor, banking system (promote
investment), and raw materials.
-Developed capitalism, which is based on competition. Provided lower prices, and better
1822: David Ricardo joined Adam Smith. He published The Political Economy of Taxations
introduced the concept of taxing.
3 Sections of Government:
Federal Revenues (2 Trillion): Income taxes, corporation taxes, excise taxes, bonds
State Revenues (100 Billion): Sales taxes, income taxes, corporation taxes
City Revenues: property taxes, sales taxes, fees, tickets.
Federal Expenditures (2,6 Trillion): Defense, Health, Social Security, Departments
State Expenditures: Education, Roads, Canals, Courts, Welfare
City Expenditures: Education, Welfare, Roads, Canals, Sewers, Water Dept, Police Dept
Robert Malthus, 1822: “The Political Economy of Population”