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economic
Tuesday, May 28, 2013 | 0 comment(s)
Economics is a social
science a systematic study of human actions in a social context it is distinguished from other social
sciences. Such as political science, psychology and sociology by the kinds of
actions and social instations with which it is concerned. Briefly, the actions
that economics is the rules, laws, and customs that tell which choices are
permitted and which are forbidden.
Scarcity and Choice
Scarcity is a universal fact of human experience from
the economist’s point of view it is measured not in physical terms but in terms
of human wants. The fact of scarcity means that we must always be making
choices.
Example :
·
How should be devide our
limited incomes between food and shelter ?
·
How chould we devide our limited time between work and
leisure?
Iwen the
wealthiest people have limited time and
most constantly be choosing what to do
and what to leave undone. Not is it possible to escape scarcity and choice by
consciously limiting wants.
Rules Of Game
Essays have been
written on the economics of Robinson
Crusoe and the choices he made in his struggle against scarcity on a lonely
island. Robinson Crusoe Economics, however cannot really be called a social
science, because it lacks a social context for choice.
The rules that
affect economic choiches in a modern economy take many forms. Some are broadly
constitutional, such as the rules limiting the goverment’s power to take
private property without compensation and due process.
The people whose
choices are governed by the rules in
turn affect the rules themselves, in two important ways :
·
First , people affect economic rules
through political channels such as voting, lobbying, and expressing opinions
·
Second, people influence policy rules by
the way they react to those rules. In a well governed society, policy decisions
should always be based on knowledge of how people will react to rules change.
Microeconomics
Microeconomics
is the study of the economic behavior of individual households and firms and
the determination of the market prices of individual goods and services.
Microeconomics is the study of large-scale economicphenomena, espedence and
protectionism versus free trade.
The Goals of Macroeconomic Policy
Macroeconomics
can best be introduced in terms of three basic policy goals : Full empolyment,
Price stability, and economic growth. The 1978 amendments, popularly known as
the Humprey-Hawkins Act, set the
target for the unemployment rafe at 4 percent, to be achieved by 1983. The rate
of inflation, as meazsured by the consumer price index, was to be reduced to 3
percent by 1983 and to zero by 1988.
Reviews the
unemployment record in the United States since 1950 and compares this record to
the 4 percent target set by the Humprey-Hawkins Act. As the figure shows, the 4
percent goal is an ambitious one. In the last three decades it has been met
only in 1951-1953 during the Korean War, and in 1966-1969, during The Vietnam
War. Still, during the 1950-1960, a 4 percent unemployment rate never seemed
entirely out of sight.
The inflation Record. The
price stability goals of the Humprey-Hawkins Act call for the rate increase of
the consumer price index to show to 3 percent per year by 1983.
The Growth Record
In order to
discuss the recent growth record of the U.S. economy, we must begin by
distinguishing between growth in nominal terms and growth in real terms. In
macroeconomies the term nominal is used to describe any quantity measured in
the ordinary way-in terms of the dollar prices at which transactions actually
take place. In contrast, the term real is used to indicate quantities that are
corrected for inflation.
The Inflation Unemployment Linkage
The third
interaction among policy goals that we will look at here, and the most complex
one, is that between unemployment and inflation. In the past, one of the
strongly held beliefs of economics was that a country could suffer from high
unemployment or from rapid inflation but the it was unlikely ever to suffer from
both at once. Policy controversies tended to revolve ground the issue of
whether to stimulate the economy, thereby lowering unemployment at the expense
of a little inflation, or whether to restrain the economy, thereby fighting
inflation at the cost of a little unemployment.
Price stability,
and growth goals of macroeconomic policy interact closely with one another in
three major ways :
a)
The rate of growth of output in
nominal terms must equal the rate of growth of real output plus the rate of
inflation.
b)
Other things being equal, an
increase in the rate of real growth tends to be associated with a falling rate
of unemployment.
c)
Other things being equal, a
rising rate of inflation tends to be associated with a falling level of
unemployment, at least in the short run.
