Money and banks
What Is Money?
Without money, you would have to use barter
to get items you want
Barter: The direct exchange of one good for
another, without the use of money
Acquiring goods and services would be much
more difficult and time-co
The Goal: Price Stability
Price Stability: the absence of significant
changes in the average price level.
Officially defined as a rate of inflation of
less than 3 percent.
Established by Full Employment and
Balanced Growth Act of 197
How do we decide what we buy?
How do we decide how much of any good to buy?
Why do we buy certain products but not others?
Socio-psychiatric: id, ego, superego
Economic: tastes, income,
expectations, other goo
Profit & Perfect Competition
The Profit Motive
The expectation of profit is the basic incentive
for producing goods and services.
Profit is the difference between total revenue
and total cost.
Economic profit is the difference
Productivity & Costs
Output & Productivity
Productivity is the efficiency with which inputs are
converted to output.
In 1850 it took 1800 hours of labor for a household of
four in the US to acquire its annual food needs. Today
it only takes abou
The US Economy
Gross Domestic Product
Gross Domestic Product (GDP): The total
market value of all final goods and services
produced within a nations borders in a given
GDP = C + I + G + (X M)
Nominal vs. Real GDP
Nominal GDP is quo
The response of consumers to a change
in price is measured by the price
elasticity of demand.
What kinds of goods are price elastic?
What kinds of goods are price inelastic?
Extremes of Elasticity
The Unemployment Record
Unemployment rates reached record heights (25 percent) during the Great
Depression. In more recent decades, the unemployment rate has varied from
4 percent in full-employment years to over 10 percent in reces
Post in Loud Cloud
What is Economics all about?
Getting ready to succeed:
12 HW assignments worth 15%
Do in excel and submit in LC
What is Chia looking for?
Supply and Demand
The Invisible Hand
The use of market
prices and sales to
signal desired outputs
or resource allocations.
market mechanism as
the invisible hand.
Supply and Demand
There must be