Unit 4 - Macroeconomics Flashcards
Principles of the Sharing Economy
- Allow individuals to monetize underused assets
- Involves peer to peer exchange
- Often uses online platforms
Sharing v. Conventional Economy
- Allows direct interaction between buyer and seller
- Involves short-term commitments for one-time jobs
Economic Efficiency of Shared Economy
- Utilizes idle assets, reducing waste
- Offers flexibility in work schedules.
- Users find help quickly.
Shared Economy: Innovation and Entrepreneurship
- Shared economy supports emergence of new businesses.
- Offer low-risk environments for testing new ideas.
Sharing Economy: Regulatory and Legal Challenges
- Struggle with adherence to labor regulations.
- Complications in taxation and insurance coverage create uncertainties.
Sharing Economy: Labor Concerns
- No benefits like health insurance
- Low wages and inconsistent work schedules.
- Platforms control conditions of work.
- Workers have little bargaining power
Sharing Economy: Market Saturation and Competition
Market saturation makes it hard for new entrants to compete.
Inflation
- Decrease in purchasing power of currency
- Cause: consumers able to buy more goods than available at current price
Demand-Pull Inflation
- Increase in aggregate demand outweighs aggregate supply
- Most common inflation
- Can result in increase in output of goods and services
Demand-Pull Inflation: Increased Govt Spending
Acts as consumer in market, results in less goods/services
Demand-Pull Inflation: Increased investments from firms
- Increases incomes of factors of production; aggregate demand increased
- Contributes least to inflation
Demand-Pull Inflation: Increased spending from households
- Higher incomes
- Larger population
- Money printed
Increased exports by country
- Increased exports increase size of market
- Goods and services consumed outside of the country, resulting in less supply
Inflationary Spiral
As aggregate demand increases, businesses and firms hire more workers, which increases aggregate demand
Cost-Push Inflation
- Aggregate supply decreases relative to aggregate demand
- More concerning, as economic output decreases
Cost-Push Inflation: Increase in cost of raw materials
- Formation of monopolies, allowing higher prices for consumer capital goods
- Natural disasters affecting supply of raw materials
Cost-Push Inflation: Increased production costs
- Increase in wages
- Regulations making production more expensive
- Least common as it decreases demand
Contradictory Monetary Policy
- Reduce money supply in economy by increasing interest rates
- Reduces consumer and business spending
Government Fiscal Policy
- Increase in taxes
- Reduces spending by removing money from economy
Price Controls - Less Effective
Bottom Text
Inflation: Impact on the Economy
- Loss of purchasing power
- Increased cost of living
- Increased Input Costs
Inflation: Impact on Companies
- Raise product prices to offset input costs, balance price hikes to avoid suppressing demand.
- Wages increase to keep pace with inflation, higher labor costs.
Monetary Policy
Central bank controls money supply/interest rates to achieve macroeconomic goals
Monetary Policy Tools
- Open market operations
- Interest rates
- Adjusting reserve requirements
- Discount rate