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Credit: Good Credit (credit cards)
- Convenient
- Security
- Emergency
- Rewards
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Credit: 3 C's of Credit
- Character - Credit history
- Collateral - What you put up
- Capacity - Ability to pay loan
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Entreprenuership: Success Determinants
- Biological - Traits
- Sociological - Networking
- Geographical - Location
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Production Values
- Efficiency
- Profit
- Quality vs. Quantity
- Work Ethic
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Consumption Values
- Comfort
- Convenience
- Spending vs. Saving
- Social Status
- Price Expectancy
- Needs vs. Wants
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Regulation:
- Health
- Safety
- Prices (in a natural monopoly)
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Natural Monopoly
When industry has large economies of sale to lower their prices to prevent competition
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Types of Price regulations:
- Price Cap
- Price Plus (whatever the cost to make + percent for profit) (no urge for innovation)
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Gov. regulations are needed to...
Keep firms out of the ground when competition isn't enough
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Regulatory Capture
Start believing they help company and workers instead of competition
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Deregulation...
- Lowers prices
- Better responses
- Only profit seeking firms seek innovation
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Externalities: Negative outcome
By product of production cost born by 3rd part. Product first, consumer second.
Ex. Air pollution from buring fossil fuels.
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Externalities: Positive outcome
By product of production enjoyed by 3rd party.
Ex. Immunization preventing one person from being sick also prevents them from spreading illness
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Fiscal Policy
The use of government expenditure and revenue collection (taxation) to influence the economy
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2 Main instruments of fiscal policy
- Government expenditure
- Taxation
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Changes in the level and composition of taxation and government spending can impact the following variables in the economy:
- Aggregate demand and the level of economic activity
- The pattern of resource allovation
- The distribution of income
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Monetary Policy
The government's control of the availability and cost of money
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The official goals usualy include:
- Relatively stable prices
- Low unemployment
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The Federal Reserve System (Central Bank)
- 7 members on a board of governers
- 12 physical banks
- FOMC (federal open market committee) - 5 bank presidents (always one from NY) plus the 7 board members
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Tools of Monetary Policy
- FOMC: Open Market Operations (Most influence): Buying and Selling bonds
- Reserve Rate: Minimum reserves each commercial bank may hold (rather than lend out) of customer deposits and notes
- Discount Rate: The interest rate at which federal reserve banks make very short-term loans to banks. The rate that the centeral bank gives to their preferred customers (other banks)
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Demand Pull
Pulls up prices
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Cost Pushing
Cost can push up pricef
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Redistribution of Income
- Does not usually go to the poor
- Ex. Welfare, Medicare, Social Security
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Unemployed
Total number of adults 16+ willing and able to work and are actively searching for a job
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Unemployment Rate
Number of unemployed divided by the number of people in the labor force
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Types of Unemployment
- Frictional: Bathtub model, dynamic flow entering and leaving unemployment. No government influence
- Structural: Lack of skills/education. No government influence
- Seasonal: Ex. Santa Clause, Lifeguards. No government influence
- Cyclical: Follows business cycle. Government influence
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Categories of Unemployment
- Re-entrants
- New-entrants
- Job losers
- Job leavers
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Inflation
An average of all prices, goods, and services as they're rising. Often unanticipated and unpredictable.
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TANF
- Temporary Assistance for Needy Families
- The US' main general welfare federa assistance programs
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AFDC
- Aid to Families with Dependent Children
- Federal assistance program provided financial assistance to children of single parents or whose families had no income
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