MicroChapter1 - RikkiNorton Microeconomics Chapter1...

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Rikki Norton Microeconomics Chapter 1 Questions for Review (1-5) 1. Inflation and unemployment are related because when you increase the amount of money  being circulated in the economy it increases the amount of spending and the demand for goods  and services. Meanwhile higher demand can cause suppliers to raise prices but also  encourages them to hire more workers, decreasing the number of people unemployed.  2. Policymakers should always consider incentives because when their policies offer great  incentives the people of the economy are sure to fall in line whereas if there is no reward they  see it as costing them more then benefiting them.  3. Inflation is an increase in the overall level of prices in the economy. Inflation is normally  caused by an increase in the amount of money being circulated, because when there is a larger  quantity of money being produced the value of the money decreases.  4. Trade among countries isn’t like a game with winners and losers because with trade both  countries benefit from each other. Trade allows a country to focus on producing the goods and  services they do best and obtain from different countries the products they specialize in. 5. The two main causes of market failure are externality and market power. Externality is the 
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  • Spring '11
  • Thompson
  • Market Power, new car, single economic actor, Rikki Norton Microeconomics, market power. Externality

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MicroChapter1 - RikkiNorton Microeconomics Chapter1...

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