The Capitalist Revolution and Inequality

Question 1

GDP

Answer 1

measure for the size of an economy, value of total output of goods and services produced in a certain time period

Question 2

GDP per capita

Answer 2

average income of people in a country

Question 3

disposable income

Answer 3

wages+ profit+ rent+ interest + government transfers received (market income), minus any outside transfers - what is left to spend out of the received

Question 4

history’s hockey stick - upward turns?

Answer 4

1) GDP per capita
2) productivity of labor
3) speed at which news travels
4) climate change

Question 5

Adam Smith’s invisible hand

Answer 5

coordination among actors can arise, without any person or institution consciously attempting to create it

Question 6

economy and the environment

Answer 6

people thought natural resources are limitless, but as production rose, so did degradation of our natural environment

Question 7

capitalism - definition

Answer 7

an economic system characterised by a combination of institutions - private property, markets and firms

Question 8

private property, you can…

Answer 8

enjoy, exclude, dispose by gift or sale

Question 9

capital goods

Answer 9

equipment, buildings and other inputs used in producing goods and services

Question 10

markets

Answer 10

way of connecting people for mutual benefit, by exchanging goods and services, through buying or selling

Question 11

3 characteristics of markets

Answer 11

reciprocated, voluntary, competitive

Question 12

firm

Answer 12

a way of organising production, where:
1) capital goods are used in production
2) wages are paid
3) employees are directed
4) goods and services are property of owners
5) owners then sell those on markets to make profit

Question 13

how did capitalism lead to growth in living standards?

Answer 13

technology and specialization

Question 14

specialization

Answer 14

we become better and more efficient at production when each person focuses on a limited range of activities (economies of scale)

Question 15

absolute advantage

Answer 15

ability to produce a greater quantity of a good or service using the same amount of resources

Question 16

comparative advantage

Answer 16

ability to produce a good or service at a lower opportunity cost

Question 17

what makes capitalism less dynamic?

Answer 17

• private property not secure
• markets not competitive
• monopolies
• too big to fail

Question 18

economics

Answer 18

study of how people interact with each other and natural surroundings in producing livelihoods and how this changes over time

Question 19

inequality across space and time

Answer 19

countries differ, most is between individuals in different countries, inequality between individuals is declining

Question 20

future of rich economies

Answer 20

missing middle, jobs replace family chores, machines do routine work

Question 21

accidents of birth

Answer 21

citizenship → caste, gender, inherited inequality

Question 22

intergenerational transmission of economic differences

Answer 22

economics status of kids comes to resemble that of their parents

Question 23

veil of ignorance

Answer 23

no one knows his place in society, his fortune, intelligence nor strength

Question 24

endowments

Answer 24

financial wealth, assets, human capital, race-gender-age, citizenship

Question 25

redistribution

Answer 25

taxes and transfers resulting in a more equal distribution of disposable income (progressive, regressive and neutral distributionally)

Question 26

predistribution

Answer 26

affects endowments and their value (change in market income)