Chapter 1 notes cont

Chapter 1 notes cont - Principle 9 Prices rise when the...

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How the economy as a whole Works Principle 8: A country’s standard of living depends on its ability to produce goods and services. 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. Other factors (e.g., labor unions, competition from abroad) have far less impact on living standards.
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Unformatted text preview: Principle 9: Prices rise when the government prints too much money. ⇒ Inflation: increases in the general level of prices. Principle 10: Society faces a short-run tradeoff between inflation and unemployment ⇒ In the short run (1-2 years), many economic policies push inflation and unemployment in opposite directions ⇒ Other factors can make this tradeoff more or less favorable, but the tradeoff is always present....
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