lecture 3 - September 13, 2010 Lecture 3 Principle 8 o...

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September 13, 2010 Lecture 3 Principle 8 o Countries standard of living depends on its ability to produce good and services Average income in rich countries is more than ten times average income in poor countries The us standard of living today is about eight times larger than 100 years ago o The most important determinant of living standards: productivity , the amount of goods and services produced per unit of labor. Productivity depends on the equipment, skills, and technology available to workers. Principle 9 o Prices rise when the government prints too much money Inflation : increases in the general level of prices In the long run, inflation is almost always caused by excessive growth in the quantity of money, which causes the value of money to fall The faster the govt creates money, the greater the inflation rate Principle 10 o Society faces a short-run tradeoff between inflation and unemployment In the short run many economic policies push inflation and
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lecture 3 - September 13, 2010 Lecture 3 Principle 8 o...

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