TEST 2 Flashcards
Karl Marx Said
We should produce according to our abilities
In the 1950’s socialists changed their emphasis in advocating socialism in capitalist countries. Why?
Because Marx’s predictions about the labor market did not materialize
What is the capitalist answer to the externalities rationale for socialism?
Externalities are a problem, but self-interested state decision makers with bad information might make the problem worse.
For property to be taken by civil forfeiture…
the owner does not need to be arrested or convicted of a crime
the latest rationale for socialism is…
if an individual receives benefits from goods provided by the state, the state has a right to the individuals property
about how much per person does the US spend on anti poverty programs
20,000
Don Bordreaux’s tale about Smith and Jones points out that….
fairness has more dimensions than just worldly goods
individual choices have unequal outcomes
Burkhauser, Larrimore and Simon point out that, because more people are living together without being married, Piketty and Saez…
identify some taxpayers as being poor, even though they are not
Thomas Sewell points out that..
this decades poor may be next decade’s middle class
Bastiat says that machines…
do not cause unemployment
If the Fed lowers the required reserve ratio….
Excess reserves of banks immediately rise
If the Fed puts money into the banking system…
the Federal Funds rate will fall because money is now more abundant
If the required reserve ratio is .2, then a $25 Billion purchase of bonds by the fed will…
raise the money supply by $250 million
If the price index was 220 in the year 2005 and is 275 today, then since 2005 we have seen a total of….
25% inflation. Because the inflation formula is..
I = (PI year1 / PI year2) - 1
If Bubbles earned $30,000 in 2000 when the CPI was 180 and earned $40,000 in 2013 when the CPI was 230….
Bubbles was worse off in 2000
What does M1 include?
currency held outside banks
checking account balances
travelers checks
If the CPI in the 2013 is 650, with a base year of 1967, then….
The same stuff that wouldve cost $100 in 1967 costs $650 in 2013
When the price of an important resource in the economy rises sharply…
This cannot cause a general inflation because in order to spend more on some things, people must spend less on others, which lowers the prices of other things.
If the money supply is 8 trillion, velocity is 3, price level is 6 and output is 4 trillion, then according to the simple quantity theory….
MV=PQ
```
8) (3) = (6) (4
24 = 18
(reduce)
12 = 9
MV rises to 12 price level rises to 9
~~~
what are the assumptions of monetarism?
The equation of exchange holds
Velocity is a stable function of a few variables
eventually output is at potential
The pizza place example teaches…
evenly spread anticipated inflation does not change wellbeing
Suppose that we have unanticipated inflation, if it is evenly spread throughout the economy, then problems include..
destabilization due to lenders getting poorer and borrowers getting richer
Inflation can cause unemployment because
people are unsure of the value of goods, services and resources
What is behind the idea of “the inflationary tax?”
inflation reduces the real value of government debt
