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Flashcards in chapter 2 Deck (39)
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1
Q

what happens if we leave prices free to adjust and consumers and producers free to transact?

A

end up maximizing the gains to society from production

2
Q

spend your money on yourself…

A

care how much you spend and buy what is most valuable

3
Q

spend you money on someone else…

A

care how much you spend but don’t know the recipients’ highest value

4
Q

use someone else’s money spent on yourself…

A

don’t care how much money, but by what is most valuable

5
Q

use someone else’s money to spend on someone else…

A

don’t care how much money spend and don’t know the recipient’s highest value

6
Q

free market prices function to…

A

ration goods, give incentives, and transmit info

7
Q

“the calculation problem”

A

how to secure the best use of resources known to any members of society, for ends whose relative importance only these individuals know

8
Q

dude who came up with the calculation problem

A

Frederick hayek

9
Q

spontaneous order

A

people organize themselves and interact efficiently, if given freedom to do so

10
Q

individuals who interact in markets have…

A

advantages over state planning

11
Q

a major disadvantage of the state

A

the use of force

12
Q

natural experiement

A

drawn on arbitrary border across a country, let alone one part be free and the other be controlled by the state

13
Q

what kind of countries are more well off?

A

more free countries

14
Q

understanding with free markets starts with…

A

value, people making choices, interacting, to find more value in life

15
Q

“public choice school”

A

participants in the political sphere aspire to promote the common good

16
Q

theory of rational ignorance

A

explains how the worst can rise to the top (ignorant of countless bits of info)

17
Q

rational ignorance

A

refusing to expand resources to gather info that will almost certainly not lead to a change in the quality of life

18
Q

the markets encourage the consumer to…

A

be informed

19
Q

fallacy of division

A

thinking that what’s true for a group must be true for all the individuals in a group

20
Q

individual choice

A

individuals decide for themselves

21
Q

authoritarian choice

A

a single individual/governing body makes decisions for the population

22
Q

democratic choice

A

made by individuals voting on decisions for the entire population

23
Q

interest groups

A

means that individuals are forced to spend resources on goods they don’t want (old people)

24
Q

solution to interest groups

A

limiting state power

25
Q

“regular” means now…

A

“control”

26
Q

it’s profitable for firms to be…

A

efficient with resources

27
Q

direct costs of regulation

A

government admin costs

compliance cost

28
Q

government administrative cost

A

sacrificed in order to pay govt employees to monitor the regulatory program and enforce the statues

29
Q

compliance cost

A

how much must be sacrificed by regulated entry to follow the law

30
Q

indirect costs of regulation

A

results from changes in behavior of firms and individuals due to the regulation

31
Q

regulation restricts…

A

choices of consumers and producers (CAFE)

32
Q

with so many and varied regulations…

A

no one can know if they are following the law

33
Q

regulatory capture

A

when regulators find it more advantageous to work to benefit some firms rather than to perform their duties

34
Q

when there are a few, huge and regulators…

A

they often end in errors

35
Q

rent seeking

A

individuals expanding resources to prosper (using lobbyists)

36
Q

bootleggers and baptists problem

A

rent seeker uses others to do his bidding

37
Q

status quo minus fallacy

A

eliminate one element of status quo and conjecture that this element will have only a direct effect that won’t be compensated (think bad behavior will flourish)

38
Q

law of unintended consequences

A

intervening in a complex system may create undesirable outcomes

39
Q

news media don’t…

A

see what’s below the surface of a story