13_DavidHume

13_DavidHume - wage is constant. A few years ago it to...

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The Price of Key Items in the USA Readings: Zagorsky Chapter 6 “Using Prices”
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David Hume (1711-1776) His mother thought he was smart so sent him along too. He was 12. Finished in 3 years. Moved to France and wrote “A Treatise of Human Nature,” his most famous book. Hume’s writings were very skeptical and anti-religious He tried a number of times to become a professor but was turned down because of his religious views. Born in Edinburgh. Father died when he was 2. His brother went to Edinburgh Univ. in 1723.
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Hume’s Economic Ideas I Two types of variables in economy. Nominal variables: items measured in money units. Example: Price of large burger was $1.50 a few years ago. Today $3.00. Minimum wage was $3.00 a few years ago. Today about $6.00 per hour.
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Hume’s Economic Ideas II Two types of variables in economy. Real variables : items measured in physical units. Example: Ratio of burger price to minimum
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Unformatted text preview: wage is constant. A few years ago it to $1.50 / $3.00 hour of work to earn a burger. Today it takes $3.00 / $6.00 hour of work to earn a burger. Real Vs. Nominal Changes in prices impact nominal variables but not real variables. It takes 15 person hours to paint a room. The amount of time does not change if prices are high or low. If it takes 5 people 10 hours to assemble a computer at $10 an hour ($500 labor) to build one computer. If prices are twice as high then it still takes 5 people 10 hours to assemble a computer. Since all prices are doubled it costs $20 an hour ($1,000 labor) to build one computer. Humes Classical Dichotomy Classical Dichotomy : Economic variables can be theoretically separated into two groups, real and nominal variables. Money impacts nominal variables. Money does not impact real....
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13_DavidHume - wage is constant. A few years ago it to...

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