Live chat week 2 - Livechatweek2 Chp561112 Chapter 5 What...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Live chat week 2 Chp 5-6     11-12 Chapter 5 What is the economic role of government? the federal government guides the overall pace of economic activity, attempting to maintain  steady growth, high levels of employment, and price stability. By adjusting spending and tax  rates (fiscal policy) or managing the money  supply  and controlling the use of credit (monetary  policy), it can slow down or speed up the economy's rate of growth -- in the process, affecting  the level of prices and employment. What are some potential shortcomings of the market? "basis risk" is a special kind of market risk arising from a change in the relationship between two  risk factors or financial assets - such as two interest rates, or the price of a hedge and its  hedged position. And market "liquidity risk" describes the danger of being unable to sell a  market position at short notice because the number of buyers has dried up. We'll take a closer  look at both these special forms of market risk later on. What are public goods? public good  is a  good  that is  nonrival  and  non-excludable . Non-rivalry means that  consumption of the good by one individual does not reduce availability of the good for  consumption by others; and non-excludability that no one can be effectively excluded from using  the good. [1]  In the real world, there may be no such thing as an absolutely non-rivaled and non- excludable good; but economists think that some goods approximate the concept closely  enough for the analysis to be economically useful. What is a free rider? In economics , collective bargaining , psychology , and political science , "free riders" are those who consume more than their fair share of a public resource, or shoulder less than a fair share of the costs of its production. Free riding is usually considered to be an economic "problem" only when it leads to the non-production or under-production of a public good (and thus to Pareto inefficiency ), or when it leads to the excessive use of a common property resource . The free rider problem is the question of how to limit free riding (or its negative effects) in these situations.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The name "free rider" comes from a common textbook example: someone using public transportation without paying the fare
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/23/2011 for the course ECON 204 taught by Professor Mimi during the Spring '10 term at Akita International University.

Page1 / 5

Live chat week 2 - Livechatweek2 Chp561112 Chapter 5 What...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online