Lesson 1 Basic Economic Understanding

Lesson 1 Basic Economic Understanding - #1 Basic Economic...

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#1: Basic Economic Understanding Two Economic Assumptions: People act in their own self-interest People make informed decisions Five Key Characteristics of a Pure Market Economy: Private Property Rights Profit Consumer Sovereignty Self-Interest Competition Nine Economic Principles: People have choice Every choice has cost(s) – opportunity cost (what you give up) Rational people think at the margin People respond to incentives, both positive and negative Exchange benefits both traders Markets work with competition, information, incentives and property rights Skills and knowledge influence income Monetary and fiscal policies affect people’s choices Government policies have benefits and costs Ten Economic Goals: 1. Political Stability: Consistency in policy making promotes consumer confidence. Political uncertainty has a negative effect on a country’s economy. 2. Reduced Public Debt: More public debt = higher interest rates, and higher prices on consumer goods. The solution to public debt is balanced budgets for governments. As debt increases, it adds worry for future
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  • Fall '11
  • ChristinaLovell
  • Economics, public debt, pure market economy, Basic Economic Understanding

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