McConnell_Brue_Chapter02

This was not the case in the united states and as

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Unformatted text preview: h he was able to observe the natural function of price in the market place without intervention. His reference to the process as an “invisible hand” suggests he perceived it to be a semimagical process in that all decisions regarding production, distribution and purchases for consumption occurred automatically and efficiently. Adam Smith was incapable of understanding exactly how the process worked, but he did recognize how unique it was. Interestingly enough, he was observing and being impressed by the very functions you and I take very much for granted today. 12 Chapter 2: The Market System and The Circular Flow Slide 30 In summary, we review all the major automatic functions. Market systems are efficient in terms of production and consumption and this is accomplished due to natural incentives inherent in the process. Virtues of the Market System Efficiency - The system promotes the efficient use of resources. All decisions are enabled through freedom of choice in the market system. When we consider the synergistic effect of these fac...
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This note was uploaded on 09/10/2009 for the course ECO 2251 taught by Professor Kirkland during the Spring '09 term at Troy.

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