How the Economy as a whole works 8)Our Standard of Living depends on our productivity.(Ability to produce goods and services) Productivity: Output per person determines the standard of living. Standard of living = goods and services/population That gives us per capita income.Legislation can create negative or positive incentives.Government can influence that.Tax laws need to be continuosly examined.Regulations can produce negative incentives. 9)Prices rise when government prints too much money 1)Individual prices: Microeconomics 2)Composite price level: Macroeconomics Inflation:Only one thing determinates this,government printing too much money.When the money is fixed, we have less dollars to spend on things, prices fall. When there is more money in circulation prices rise because people have more money to spend. 10)There is a short-run trade off between inflation and unemployment. Usually they control prices; instead of jobs because it is easier to not have as much unemployment in the future. Business cycle:Fluctuation
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