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p 6eople mistakenly think that what applies to the part applies to the whole.1
p hen you make one business richer you have to make another business
poorer. The individual is saved, but the county is not made richer.2
p There is a fear that we will produce more output than the economy can
absorb.3
p This fear is groundless because national income and national output are
the same.4
p ¦f people hold on to their money there will be less income for the
producer, which means he will produce less and the consumer will
consume less.4
year.5
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country¶s people.6
of wealth.6
p ë country can live beyond its flow of real income by surviving on its
p The national wealth is made up of the goods and services that can be
bought with the money a country has. ¦t is not just the amount of money
that a country has. hen adding up the national wealth keep inflation in
p ¦t is important to keep in mind that output changes through time, cars and
D6.8
p oods that are decreasing in price are not counted when considering the
cost of living.8
p 6eople¶s real wages (wages adjusted for the cost of living8) are decreasing
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the inflation rate is one point too high. That means the average ëmerican
p This means that when the media said that wage rates were declining the
p ëlso, while wage rates have been declining; fringe benefits have been
increasing.10
p ¦nternational Comparisons
p ¦t¶s difficult to compare two countries that have very different outputs.10
p The usual way of comparing two countries is by the money value of their
output.11
a lower price.12
p The national output is measured at how much the product costs, but in an
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p The countries with largest D6s are the countries with the largest
output.14
p The countries with the countries with the largest D6 per capita are the
countries that are richest when the wealth is divided among the people.15
p utatistical Trends
p The media interprets trends in their favor. The truth is that their statistic is
marketplace.17
p ¦n Third orld countries that rise in income and are able to afford better
nutrition, more poor people will survive and the average income may go
p The first effect is always seen.
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p ë good economist will allow a bad first effect to occur because he knows the
p hen James .¶s son breaks a window the glazier receives 5 francs, which is
seen.
p ºou also have to take into account what is unseen, the shopkeeper loses money he
p Therefore, the sum total of national labor is not affected by whether the window is
broken or not.
p The advantages of the tax and the benefits to the providers are seen.
p The disadvantages of the tax and the injuries to the providers are unseen.
p The service that is performed for the taxpayer should equal another service that
could have been performed for the same price.
p The tax shouldn¶t just benefit the officer and his family.
p £very public works project should benefit the taxpayer who pays for the project.
p orkers should not just build and repair so they can have work.
p £veryone is taxed for the labor he puts into the project.
p The reward for the labor should be found in the usefulness of the project.19
c
p The government has four different ways of taking money from the people: taxes,
p upending is used for current items20 (you pay with taxes), and future items (you
p ¦f the government spends exactly what it receives in tax revenues the budget is
in a surplus. hat it has not paid in taxes is its national debt, the amount it
owes.21
p Taxation
p The government can collect more tax revenue at a lower tax rate.22
p The incidence of taxation falls on the poor when the rich are able to escape
p hen poor people pay more taxes it is called a regressive tax. hen the
p *ocal Taxation
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p The £uropeans have a ³value added´ tax24, which taxes every part of
production. This is less visible than a sales tax and therefore generates
more revenue.25
inflation increases.26
p ¦f someone inherits a bond he inherits the debt of the bond and the wealth it pay it
off. However, if the bond is sold, than the younger generation is issued a new
bond and the debt is liquidated as so far as the older generation is concerned.27
p New bonds are sold when the old ones are paid off. uo, the national debt never
p onds take a toll on the economy because they take funds out of the private
sector.28
p hen the national debt reaches a certain size investor begin to worry about
whether they¶ll have to raise interest rates. Raising interest rates can affect other
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p hen the government provides goods and services there is no incentive to stop
the losses. 6eople pay the same for a good or service, but their taxes are raised.30
p oods and services can also be priced above costs. uurplus funds may be
spending goes up. hen the government is in an economic boom tax revenues go
up, while government spending goes down. These are called ³automatic
p ëll money that is spent is respent. ½oney is taken from taxpayers33 and spent
somewhere else. The only way there will be an increase in spending is if the
p uometimes monetary costs of a policy are very high but the costs of not
doing it are even higher. The costs to the economy are higher than the
p uometimes the cost of an item is greater than it¶s benefit and consumers
will only consume it at a lower price.35 The government might then offer it
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would make it the higher price and the cost of the government program.36
unemployment compensation.37
p The problem with government pensions is that the money comes from the
investment made.38
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p The reat Depression has brought out the myth that capitalism is wrong and that
p hat made people hate capitalism is that Hoover didn¶t do anything to fix
our economy, but when FDR came and the government intervened, the
economy recovered.39
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borrow money.40
p £conomists also believe that inflation drove interest rates down and made
p The central bank was responsible for the contraction of the money
supply.40
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p There is a myth that says that the free market self-destructed, but it was
p Hoover did not give up all control of the economy, which is commonly
believed.
p ith the Ë.u. putting a tariff on their products, foreign companies stopped
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p ënother mistake Hoover made was keeping artificially high, while prices
unemployed.43
p Hoover imposed taxes on bank checks, and raised the discount rate, which
p Then, Hoover imposed the largest tax increase ëmerica had seen outside
of wartime.43
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p FDR promised to cut spending and have less government intervention, but that is
p FDR held a bank holiday for 9 days and afterward 2,000 banks never
opened again.45
p Congress gave the president the power to change the price of gold. He
p Then FDR decided to remove the gold standard, which led to limitless
currency.46
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p FDR arbitrarily decided to end prohibition.46
p ¦n the first year of the new deal, FDR decided to spend 7 billion more than
p FDR passed the minimum wage laws, which allowed many people to
p Ënder the NRë, the government regulated prices and terms of sale.47
p The cost of doing business rose by 40%; production suffered and didn¶t
p FDR put in place many tax increases. ët the end of 10 years, the top
p The Cë and 6ë produced a lot of useless jobs that created wasteful
p uigns of *ife
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p From 1935-36 the uupreme Court outlawed many acts and programs of
FDR. 50
p The economy got better and then went into a slump again.50
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p hat caused the second crash was the passage of the National *abor Relations
p The ³agner ëct´ took disputes from the courts of law and brought them into a
Federal ëgency.51
p FDR tried to push up tax rates to 100% for incomes over $25,000;
p FDR also tried to appoint new judges for anyone over 70. This plan also
failed in Congress.52
c )
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p ½oney and banking provide the incentive to produce goods and services.53
p ½oney in and of itself is not wealth-it¶s how wealth is produced and distributed
that¶s important.53
exchange.54
p hen a monetary policy is corrupt people lose wealth because bartering is how
p ¦nflation
p hen the money supply in a country rises, goods and services become
more expensive.56
p old is used to back up goods because there is a limited supply of it, and
output.59
p Deflation
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p During the reat Depression the Federal Reserve decreased the money
supply (raising inflation) when it should have decreased the money supply
by lowering inflation.62
others people.63
p FR is based on the idea that all the depositors will not want to get their
money at the same time. The banks keep a fraction of the money in their
p The FD¦C was created to insure people who lost their money so they
wouldn¶t all run65 to the bank at the same time and cause the bank to fail.66
p The Federal Reserve uystem controls the money supply in the economy by
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in guarded tones.
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p New Classical economists believe wages and prices are flexible. New Keynesian
economists believe that wages and prices are ³sticky´ and that you cannot simply
lower prices to balance supply and demand. This is why they believe involuntary
p ½enu costs are the costs a firm has to pay to adjust to the new prices. ën example
p uome economists believe that because menu costs are so small they don¶t help
explain recessions. Jthers say that though they are small they have large effects
on the economy.
p 6roponents of this idea believe that a change in the price for one firm benefits or
p hen firms set prices, they stagger them. This makes the overall price change
p The problem with staggered price increases is that no firm wants to be the first to
p ¦n an economy each firm depends on the other to cut price when they do if the
don¶t the firm that made the cut will lose money.
! $
p New Keynesian economists believe that lower wages reduce the efficiency of
workers.
p ¦f a worker¶s wages are high, they are less likely to quit the job.
p ¦f the firm pays its workers well the best workers are unlikely to leave.
,
p ½y opinion of FDR didn¶t change after the speech. ë lot of what he said ¦ had
read in the article ³reat ½yths of the reat Depression´ by *aurence . Reed.
efore ¦ had read that article ¦ thought he was a great guy partly because there is a
monument towards him in ashington D.C. and ¦ assumed that he got ëmerica
p ëfter reading the article and listening to him speak ¦ agree that the ëëë was
wrong. ¦ more strongly agree with that after hearing that we had to import food
talking about how we were paying high taxes for people not producing. ¦t reminds
p ¦ was especially moved by him saying that in the 6ë the jobs would only go to
Democrats who would vote for him to run another term and put in place or keep
the same destructive programs that kept this country in the reat Depression.68
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pN. regory ½ankiw, ³New Keynesian £conomics,´ The Concise £ncyclopedia of