From Here to Economy: A Shortcut to Economic Literacy

Todd B. Buchholz, written in 1995

Study Guide Questions

Part I - How's the Economy Doing: Macroeconomics

The Big Picture

Introduction

1 On what issues is there almost unanimous support from professional economists?
2 What act of Congress does the author cite as one of the primary reasons for the Great Depression?
3 How did the Victorian economist, Alfred Marshall, define economics
4 How does the author define "economics"?
5 What luxury is available to biologists, but not economists?

The Big Picture (introduction)

6 If macroeconomics is an Aerial view of the economy, then (in keeping with the metaphor) what is the toughest challenge for a macroeconomist?

What is the Business Cycle?

7 How have economists been at predicting the booms and busts (upturns and downturns) of the business cycle?
8 What are the general reasons for why a downturn in the economy occurs?
9 What two institutions are cited as being potentially responsible for economic policy mistakes?

What Caused the Downturn of 1990?

10 What behavior of Americans was the Federal Reserve targeting in 1990 when they began to raise interest rates and print less money?
11 What is it called when banks get more stingy and lend much less money out than they had in the past? This is what shocked the financial system after the bonanza of real estate lending in the 1980s.
12 Who was the chairman of the Federal Reserve in 1990?
13 The collapse of what nation and major U.S. enemy caused defense spending to decline so much from 1986 to 1990?
14 What event in August of 1990 caused oil prices to skyrocket?
15 After the downturn in 1990, what was the general mood of the consumer and business investor?
16 What do people generally believe about the duration of whatever phase of the business cycle they are living through?

How are Unemployment Rates Determined, and What Do They Mean?

17 What two economic statistics are added together to create the "misery index"?
18 Rather than unemployed, how does the BLS refer to someone who has no job and is not actively seeking one?
19 How many different jobs does the American worker hold during a lifetime?

Do Most of the Jobless Face Short-Term or Long-Term Unemployment?

20 In 1995 (when the book was written), what percentage of the jobless population were unemployed for over six months?
Why are Economists Sheepish About Unemployment Insurance?
21 What is the terminology for the minimum wage a jobless person will insist on before accepting a new job?
22 What did Clark and Summers discover about the number of people staying unemployed for longer than three months if they were receiving unemployment insurance?
23 What type of government programs that assist the unemployed do most economists favor?

What is Inflation, and Why is Everyone Afraid of It?

24 What is the most commonly quoted inflation statistic?
25 What makes the CPI a sloppy statistic?
26 What two big reasons are there for why overall inflation really hurts
27 What is the terminology that is used when a government starts adding more coin (or bills) to the money supply?

Why Do Most People Hate Inflation?

28 What does inflation make it difficult for businesses and households to do as they look to the future?
29 What is the terminology for the expense of changing price tags and/or posted prices?
30 What is a big factor in determining the ability of economies to get more efficient, and businesses and households to get wealthier?

What is Bracket Creep?

31 What is the terminology for a tax system in which people who make more money pay a higher percentage of their income in taxes?

What is Hyperinflation?

32 What to the worth of paper money during a period of hyperinflation?

What Causes Hyperinflation?

33 If people believe a paper money is worthless, then how is a trade transacted?

Uncle Sam the Debtor

Introduction

34 What are the two "annoying trends" that have been assaulting Americans?
Why Doesn't the Government Balance Its Books?
35 From 1960 to 1995 (the date of publication of the book), how many years was the federal budget balanced?
36 What type of "tragedy" does the decentralized federal budgeting process create?

What is the Difference Between the Federal Deficit and the Federal Debt?

37 What is it called when the government spends more in any given year than it collects in revenue?
38 What is it called when the government adds up all the borrowing over all the years?

What is the Difference Between the Cyclical, Structural, Unified, and Primary Deficits?

How Big is the U.S. Debt?

39 What is the name for the statistic that measures the size of the economy by adding up the value of all the goods and services we produce?
40 What is the average national debt to GDP ratio for industrialized countries around the world?
41 What was the peak debt to GDP ratio during World War II?
42 How low did the debt to GDP ratio get during the 1970s?
43 What computation does the Northwestern University professor, Robert Eisner, use to make the debt picture look less desperate?

How Can Deficits Affect the Economy?

44 What are the type of deficits called that are ongoing rather than just the temporary blips that naturally accompany recessions?
45 What is the economic term used for when the government borrows money that will not be available to private businesses?
46 What 2 effects will depressed private investment have on workers some time down the road?
47 What effect does "crowding out" have on long-term business prospects?
48 When interest rates get higher in the United States, are foreign investors more or less likely to buy U.S. debt?

Will Our Deficits Punish Future Generations?

49 What is the term for the type of accounting that estimates how big a burden government policies will place on old people, middle-aged people, young people, and future generations?
Is It Possible to Save More to Make Up for Tomorrow's Debt Reckoning?
50 Is it reasonable to expect that people will save more money now rather than leave their debt to future generations?
51 What is the economic term for when Congress spends money?

What is Fiscal Policy?

52 What type of fiscal policy is it when the government spends more in the hope of spurring (growing) the economy?
53 What type of fiscal policy is it when the government cuts back on spending in an effort to slow an overheated economy?
54 Who was the British intellectual that is credited for giving fiscal policy its 20th century analytical grounding?
55 How did Keynes answer his question, "Can America spend its way into recovery?"
56 What are two "automatic" stimuli that occur when the economy is in a downward trend?
57 What are the five reasons for why discretionary fiscal policy often fails

What Was the Phillips Curve, and Where Did It Go?

58 What is the two economic statistics appeared to W.H. Phillips to have an historical inverse relationship?
59 What is the economic term that is used to describe the economic condition of the 1970s: high unemployment and high inflation?
60 Does a belief in the Phillips Curve support or reject the Keynesian view of using increased government spending to end a period of high unemployment?

What is Monetary Policy

61 If everyone in the U.S. got $10 million at the same time, would everyone be rich?
62 What did Adam Smith teach about the only way to measure wealth?
63 What is the economic term for getting the right amount of money into the economy?
64 What is the goal of good monetary policy?
65 How does one get to be one of the 7 board of governor members that decide how much money there will be in the United States?
66 Does the independence of the Federal Reserve (central bank) give the U.S. money more or less credibility around the world?

How Does Monetary Policy Work?

67 What kind of interest rate does the Fed control?
68 What are two examples of purchases consumers are more likely to make in a lower-interest rate economic environment which make loans cheaper?
69 Who was the Fed chairman in the 1970s that led the charge to raise interest rates and cut the money supply in an effort to tame inflation?
70 In Using the engine metaphor, what is an engine's equivalent of the Feds use of monetary policy?
71 In using the engine metaphor, what is the economy's equivalent to an engine's horsepower?
72 Is using monetary policy to affect an economy a short-term or long-term solution to economic illness?

What is Money?

73 What is the economic term for the sum of all the paper money, coins, and checkable deposit accounts?
74 Is gold part of the U.S. money supply?
75 The credibility of what two groups creates the confidence the world has in U.S. money's stability?

How Does the Fed Create Money?

76 What three tools can the Fed use in order to get private banks to lend more money?
77 If the reserve ratio is 30%, and a person deposits $100, then what is the maximum amount of money the bank is allowed to lend out to other customers?
78 If the Fed wants to decrease the money supply, would it raise or lower the reserve ratio?
79 What type of businesses are allowed to borrow money from the Fed at the discount rate?
80 If the Fed wants to add cash into an economy in order to increase the money supply, would it command a bank to buy or sell U.S. Treasury bonds?
81 What institution within the Fed handles the open market operations?
82 What is the economic terminology for increasing the amount of money that is available to purchase things?
83 One of the downfalls of monetary policy, is that even though the Fed can make more money available for banks to lend, what can the Fed not actually force banks to do?

How is the Fed Structured?

84 When was the Fed created?
85 How many regional Federal Reserve Banks are there?
86 How long is the term for a Fed Governor?
87 How long is the term for the Fed Chairman?
88 Who serves on the FOMC?

The Very Model of a Modern Major Market: Microeconomics

Introduction

89 What do economists call the study of how competition and supply and demand bring consumers and producers together in the marketplace?

How Does the Free Market Work?

90 What is the economic metaphor that cheered when Tom's surf shop went bankrupt due to the wasting of scare resources?
91 What does the market force people to do with raw materials?

How Do Prices Keep the Market in Line?

92 Who gets the signal from prices and profits to start manufacturing a certain product?
93 If there is a certain product that people really need or want, will profits on the sale of that product be high or low?
94 If profits on a product are too high, how will the market, in the long run, correct that problem?

Can the Market Work Without Complete Information?

95 What is the basic idea behind Hayek's "ignorance argument"?
96 What is the only thing that market players need to know in order to make their choices?

What is the Marginalist Approach to Economics?

97 What new system of economics do Alfred Marshall and William Stanley get credit for bringing into the mainstream?
98 On what is the key focus of Marginalism?

How does Marginalism Affect Supply and Demand?

99 What is the economic term for the decline in price that someone is willing to pay for a product relative to how much of the product he/she already has?
100 What type of economic "game" are firms making when they choose between spending an extra dollar on hiring workers or spending that same extra dollar on a machine?

What is Elasticity, and Why Is It Important?

101 What is the economic term for the measurement of how responsive firms and households are to price changes?
102 If demand does not change much as prices fluctuate, is demand considered elastic or inelastic?
103 If demand does change as prices fluctuate, is demand considered elastic or inelastic?
104 Does a greater degree of substitutes and alternatives make a product's demand more elastic or inelastic?
105 If we need a product immediately, will that lack of time create elastic or inelastic demand?
106 If a product costs a lot, is demand likely to be more elastic or inelastic?

Has the Competitive Market Been Destroyed by Big Business?

107 Who was the economist that gave name to the phrase: "creative destruction"?

How do Monopolies and Oligopolies Lose Their Power?

108 What is it called when only one firm is the seller of a good or service?
109 What is it called when a few firms are the only seller of a good or service?
110 What are the three reasons the economist, George Stigler, offers for why monopolies, although undesirable, do not necessarily need to be interfered with by the government?
111 What is the name of the theory that goes like this: prices will be low due to only the threat of another firm opening a store to compete?

What is a Natural Monopoly?

112 What is the economic terminology for a monopolist firm that continues to grow more and more efficient as it gets bigger?
What is Antitrust Law?
113 Which two industrialists are given as examples of the robber barons of the 19th century?
114 Firms can be allowed to be big as long as they can convince the Justice Department and the Federal Trade Commission that they are not doing what to their prices?

Applying Microeconomics to Major Markets

Introduction

Why are We Bombarded with Advertising

115 Approximately what percentage of GDP are advertising expenses in the U.S.?
116 In the standard economic model of "perfect competition", what is the assumed characteristic of competing goods in a certain industry?
117 As some studies have shown, does advertising, although costly, seem to create higher or lower prices in the long run?
118 What do brand name producers have a tremendous incentive to protect?
119 On what type of customers do businesses in a modern economy depend?

How Do People Invest in Education and Human Capital

120 What type of systems do countries need to develop if they are going to be economically competitive?
121 What specific type of capital is a nation's educational system developing in children?
122 What characteristic of a worker was reward far more 100 years ago than it is today?
123 What three characteristics did Moe and Chubb identify as causing the problems in the American school system?

Do Economists Care About the Environment?

124 What is the economic term for "when someone acts in a way that impacts other people who have no control over the situation"?
125 What did Pigou recommend governments do to deal with the externality of company's pollution?
126 Besides a tax, what other policy solution is proposed to put a cost on the externality of pollution?

Is Our Health Care System Sick?

127 What is the enduring dilemma of our health care system?
128 Why can there be no magical plan to cure the increasing costs we, as a nation, spend on health care?

Does Health Care Cost More Than It Used Too?

129 Approximately what percentage of GDP was being spent on health care when this book was written in the mid-1990s?
130 What is the primary factor the author cites as the cause of increased health care costs from 1960 to the mid-1990s?
131 Has the increased technology and innovation in health care increased or decreased the cost of the health care?

What Kind of Perverse Incentives Drive Up Health Care Spending?

132 Whose money are most people using when they receive medical treatment?
133 What has been the shift in the percentage of money people spend directly out of their own pockets on health care costs from 1960 to the mid-1990s?
134 Why is passing the costs of something onto a third party a "moral hazard"?
135 In the Rand study, how much higher were the health care costs of the group that had its expenses paid by someone else versus the group that paid their own expenses?

How Does Government Drive Up Health Care Costs?

136 What does the federal tax system encourage employers to provide rather than cash payments to workers?
Should the Government Require Employers to Provide Health Care Coverage?
137 A mandate that all businesses provide health care insurance to their workers would have a negative (hard-hitting) effect on which category of employee?
138 What approach to health care policy does the author recommend as being a better approach than having employers provide health care insurance?
139 What practice does the author recommend that the government outlaw insurance companies from doing?

Taking a Chance: Can We Make Life Less Risky?

140 What is the most dangerous thing (statistically) that any of us will ever do?
141 For markets to work well, to what do consumers need access?

The International Scene: Border Crossings

Introduction

142 Americans idealize the trait of self-reliance, however, on what does economic success really depend?

No Man Is an Island: How Interdependent Are We? How Much Does the U.S. Trade?

143 What is the name of the 1930 tariff act that was a contributing factor to the Great Depression?
144 What giant U.S. industry was dramatically shaken up by foreign exports from Japan?

Whom Does the U.S. Trade With?

145 Which nation is the biggest trading partner of the U.S.?

Why Do Countries Trade, Anyway?

146 What is the economic term for the ability of a company to lower costs and earn higher profits through its ability to sell to more people?

What is "Laissez-faire"? What is Protectionism?

147 When economists talk about laissez-faire policies, what do they mean?
148 What is the name of the British laws of the 19th century that severely restricted competition in the grain markets?
149 Who was the British economist that fought for the opening up of the British grain markets in the 19th century?
150 As discussed in the book, what are the two agriculture industries in the U.S. that are protected by import quotas?

Doesn't Protectionism Save Jobs?

151 Contrary to Adam Smith's "Invisible Hand" that creates jobs and wealth, what did the congressman name the trade barriers that kick people out of work?

Do Other Countries Play Fair?

152 What two foreign nations are cited as examples of practicing protectionism and creating trade barriers to competition from companies outside of their nation?

What is Dumping?

153 What is it called when a producer is selling to foreigners at a price below cost, or at any price below what it charges in its own nation?

What is the Uruguay Round of GATT?

*** This section is out of date. Currently, instead of GATT, the world organization that tries to prevent protectionism and work out trade disputes is the WTO (World Trade Organization)

What is the North American Free-Trade Agreement?

154 What are the three nations that are part of NAFTA?

What is the European Union?

155 What is the goal of the Maastricht Treaty of 1991 (which has since become a reality)?

What Do the World Bank and the IMF Do?

156 What type of countries get low interest rate loans from the World Bank?
157 Instead of money, what does the IMF offer to struggling economies?

Do Economic Sanctions Against Outlaw Countries Work?

158 What are some of the examples of nations upon which the U.S. has imposed trade sanctions?

Money Makes the World Go Round

Introduction

What is a Trade Balance?

159 What is the economic term for a country's government report of whether that country bought more from abroad than it sold to foreigners?

How's the U.S. Doing on Trade?

160 What 3 industries are cited as being those in which more services are sold from the U.S. than anywhere else?

What is a Capital Account? What is a Balance of Payments?

161 If the current account is how much U.S. money was handed over to foreigners, what is the measure of where that U.S. money held by foreigners is invested?
162 After all calculations have been made, what number will each countries overall balance of payments be?

Is It Good or Bad to Have a Current Account Deficit?

163 Is a faster growing economy likely to have a positive or negative current account?
164 If an economy has a capital account surplus, can it then be assumed that foreigners have confidence in that economy?

Is There Too Much Foreign Direct Investment?

165 What is the biggest populist worry about foreign direct investment (when foreigners are buying U.S. assets)?

What Spurs Foreign Investment?

166 What two nice prospects does the U.S. economy promise to foreign investors?

Is Foreign Investment Good?

167 If a nation attracts more foreign investment, what happens to the nation's overall cost of borrowing money?

What's the Bottom Line of Foreign Investment in the U.S.?

Why Isn't There Just One Currency?

168 What does a national currency allow a country to do as regards its banking system?
169 If a country does have a national currency, can it as more easily control its interest rate environment?

What are Floating Exchange Rates?

170 If things cost more in a foreign nation due to the weakening of the U.S. dollar, what is the economic term for what has happened to the dollar?
171 If things cost less in a foreign nation due to the strengthening of the U.S. dollar, what is the economic term for what has happened to the dollar?

Why do Currencies Change Value?

172 What are the four factors that are cited for influencing the value of the dollar versus other currencies?
173 Will inflation positively or negatively impact the value of a nation's currency?
174 Are higher interest rates more or less likely to attract foreign investors to be lenders?

Did We Always Have Floating Exchange Rates?

175 What was the name of the system used from 1946 to 1973 in which nations tried to fix their currency values?
176 Since 1973, what has the industrialized world allowed currency exchange rates to do?

What is the European Monetary System?

*** This section is out of date. Currently, the EU has moved to a single currency zone that began in 2000. The name of the currency is the Euro. A few important European nations opted out of this and still have their own currency: Britain and Switzerland. However, other large and important nations do use the Euro: Germany, France, Italy and Spain.

Who are Currency Speculators?

177 What important characteristic do speculators force upon politicians in regards to the value of their currency?
178 What does the strength or weakness of a nation's currency symbolize?

What is Capital Flight?

179 Which country is cited as an example of having capital flight in the 1980s and reversing course with better economic policies in the 1990s?

What is a Safe-Haven Currency?

180 What is the most recognized safe-haven currency in the world?

What is the Gold Standard?

181 From the 1830s until the 1930s, what did the U.S. government promise to exchange for its paper money?
182 In opinion of the author, would a gold standard make us more or less vulnerable to market fluctuations?

Going for Broke: How Businesses Finance Themselves

Introduction

What is the Difference Between a Proprietorship, a Partnership, and a Corporation

183 What is the type of business arrangement where there is one person responsible for all debts and entitled to all profits?
184 As what type of businesses arrangement are many law firms and medical offices organized?
185 What shared responsibility makes many nervous about a partnership business relationship?
186 What business arrangement offers two key advantages: limited liability and easier to raise money?

How Can a Corporation Limit Liability for Owners?

187 To what amount of money are a corporation's owners liable?
188 Why are investors more likely to contribute money to a corporation rather than a sole proprietorship or partnership?

What is the Difference Between a Public Company and a Closely Held Corporation?

189 Can a corporation be "closely held", but still have access to the public stock exchanges (like the NYSE and the NASDAQ)?

How Do Firms Pay for Their Growth and Expansion?

190 If a company is successful and makes good profits, and then uses those profits to expand the business, how does the author of the book call that type of finance?
191 If a bank lends a corporation money with the promise to get paid back later with interest at a future date, how does the author of the book call that type of finance?
192 If a group of investor pool their resources together and take on partnership or incorporate with small businesses, how does the author of the book call that type of finance?
193 If a group of investor pool their resources together and lend money to a business, how does the author of the book call that type of finance?
194 If a corporation sells IOU debt on the public stock exchanges, how does the author of the book call that type of finance?
195 If a corporation sells ownership share (stock) on the public stock exchanges, how does the author of the book call that type of finance?

What is Equity?

196 What is the business school term that is a synonym for ownership?
197 What is the name given to the people who run a corporation and are elected by the common stockholders?

What are Corporate Bonds?

198 What is the financial term for a promise to pay a specific amount of money at a certain time in the future?
199 What financial term is used if a corporation goes bankrupt and cannot pay off its bonds?

Who Determines How Risky a Bond Is?

200 What is the name of the two bond rating companies mentioned in the book?
201 What is the consequence for a company if it has a poor bond rating?

What is an Asset-Backed Security?

202 If GMAC or Sears sells to investors the right to receive payments for the debts their consumers owe on loans made by the companies, what is the financial term for what the companies have done to these loans?

Does It Matter Whether the Corporation Finances Itself Through Bonds or Equity?

Can Investors Beat the Stock Market?

203 According to the Efficient-Market Hypothesis, can individual investors consistently do better than the average "market" when it comes to picking successful investments?

Are There Exceptions to the Efficient-Market Hypothesis

204 What is the name of the government regulatory agency that investigates and punishes corporate insiders that use information illegally to profit in the stock markets?

Taking Stock of Personal Investments

Introduction

What Do Most People Invest In?

205 What is the largest investment made by American Families?

What's the First Question to Ask When Considering an Investment?

206 If an investor is going to take on a great deal of risk, what possibility will be demanded?

What Kinds of Risks Must Investors Worry About?

207 If interest rates go up, what will happen to the value of bonds?
208 Does inflation positively or negatively affect fixed-income investments, like bonds or bank CDs?

What are the Safest Investments? The Riskiest?

209 What is the financial term for the graph that compare the interest rate on short term bonds versus the interest rate on longer term bonds?
210 Is a yield curve generally upsloping or downward sloping?

What is a Mutual Fund?

211 What is it called when a large number of investors pool their money and jointly own stocks and bonds, which are professionally bought and sold for the investors?

How Can You Compare the Riskiness of Stocks?

212 What is the name for the mathematical measure of how closely a particular stock (company) follows the overall market of stocks?

What Does the P/E Ratio Measure?

213 What is the name for the mathematical measure that compare the stock's current trading price to the firm's earnings in the past year?
214 Is a stock with a high P/E ratio more or less expensive?

How Can you Reduce the Risks of Investing?

215 What is the best way to reduce the risk of losing money in investments?
216 What type of mutual fund is one of the easiest and cost effective ways to diversify?

What makes Stocks Go Up or Down?

217 What type of stocks did John Maynard Keynes recommend investing in?
218 What type of companies' stock does the author of the book recommend investing in?

How Do You Read the Stock Tables in the Newspaper?

219 What is the financial term for the amount of money that is paid out to the owner of each share of stock annually?
220 What is the financial term for how many times a stock has been bought and sold during the day?

What is the Difference Between the New York Stock Exchange, the American Stock Exchange, and the NASDAQ?

221 Which stock exchange has most of the biggest companies?
222 Which stock exchange is a computer-based trading system?

How Can Investors Bet on Foreign Companies?

223 What is the name for the mutual fund-like arrangement in which a professional investor pools money from a large number of investors and then invests the money into a specific foreign company?
224 What is the name of the stock receipts that represent the rights to a share of ownership in a foreign country?

What Are the Added Risks of International Investing?

225 What are the two big risks that cannot be ignored when investing in foreign countries?

What are Futures and Options?

226 If you promise to buy (or sell) something at some certain date further along in time, what type of contract is that called?
227 What is it called if you buy the right to decide at a future date if you want to buy (or sell) something or not?

They Shoot Economists, Don't They

Introduction

228 What profession did Alfred Marshall believe should be the fourth profession focused on improving the peoples' material health added to the medieval three: medicine, law, and theology?

Where Did Economics Start

229 Who was the ancient Greek philosopher that praised private property and denounced the accumulation of wealth for wealth's sake?

Who Were the Mercantilists?

230 What did Mercantilists believe were the best measure a nation's wealth?
231 Did Mercantilists support the concept of foreign trade?
232 Did Mercantilists support the concept of monopolies?

How Did Adam Smith Attack the Mercantilists?

233 What did Adam Smith believe should be the way to measure the real wealth of a nation?

Was Adam Smith a Dismal Scientist?

234 While other Enlightened thinkers focused on cause and effect relationships in physical forces and the planets, on what did Adam Smith focus?
235 During the time of Adam Smith and all the way until 1903, of what are of study was economics considered to be a sub-set?

How Does the Wealth of Nations Portray People?

236 What are the two "propensities" upon which Adam Smith laid his foundation of economic thought?
237 According to Smith, what should a good government go to harness the propensities of human nature in order to create wealth?

What is Adam Smith's Invisible Hand?

238 What metaphorical name does Adam Smith give to the force that works through the price system to harmonize supply and demand?

Why Did Smith Praise Division of Labor?

239 What two important concepts did Adam Smith identify as being the most vital components of bringing wealth to nations?

Who Was David Ricardo and How Did He Improve Adam Smith's Trade Theory?

240 What is the name of the "law" that David Ricardo is credited with formulating?
241 According to David Ricardo, does it make economic sense for a nation to trade with other nations even if there is an absolute advantage in all products?
242 What is the economic term for the sacrifice that is made by not producing a good?
243 How does a person or a nation determine in what to specialize?

Why Was Thomas Malthus So Depressing?

244 Malthus hypothesized that population size would double in how many years?
245 Did Malthus believe that food production would be able to keep pace with population growth?
246 Have the theories of Malthus proved even remotely correct?

What Was Jeremy Bentham's Felicific Calculus?

247 What was the slogan that Jeremy Bentham believed should be engraved on the desk of government legislators?
248 How have Jeremy Bentham's Felicific Calculus idea's been applied to modern economics?

Why Did John Stuart Mills Oppose Welfare?

249 What did John Stuart Mills worry about the effect that government aid (welfare) had on human behavior?

Why Was Alfred Marshall the Darwin of Economics?

250 What two "runs" did Alfred Marshall acknowledge that economic science must study?
251 In the short run, which aspect is more consequential to prices, supply or demand?
252 In the long run, which aspect is more consequential to prices, supply or demand?

Rebels with a Cause: Schools of Thought That Break from the Mainstream

What Was the Austrian School About?

253 What was the principle declaration that the Austrian school economists were making in regards to human nature?
254 Who is the economist from the Austrian school that believed government intervention in interest rates threw a wrench into business investment, resulting in a boom-and-bust cycle?
255 Who did Hayek and Mises claim could never collect enough information that spontaneously arises in a market system in order to guide their production decisions?
256 Of what particular economic system were the Austrian school economists most critical?

Who Has Rational Expectations?

257 According to the Rational Expectations school of thought, can government policy fool people into a certain type of economic behavior?
258 Why did Robert Lucas feel that old behavior is a poor basis for creating new policy?

Why Do "New Keynesians" Disagree With the RE School?

259 What is the terminology "rational expectations" economists use to describe the idea that markets adjust simultaneously to get rid of any surplus or shortage?
260 What are the two concepts stressed by New Keynesians to explain why the economy may not react so quickly to government spending or money supply changes?
261 How do "rational expectations" economists explain that the unemployment during the Great Depression was mostly voluntary?

What Is Supply-Side Economics

262 What are the two principle questions that revolve around the issues dear to Supply-Side Economists?
263 What was the major difference regarding prices in the 1970s versus in the 1930s (The Great Depression Era)
264 What are some examples of economic choices that people may start making when taxes are too high?
265 What do supply side economists believe will eventually happen to the overall level of government debt and year-to-year government deficits if tax rates are reduced?
266 Which class of people do critics of supply-side economists feel are being favored by tax cuts?

Why Do Public Choice Scholars Distrust Government?

267 In what do "public choice" economists believe that politicians are most interested?
268 How would a "public choice" economist answer the following: should we assume that the government will take prudent steps in the face or political and bureaucratic pressures?
269 What did "public choice" economists point out that forgot to be asked about government as standard textbooks prescribed government action to cure market imperfections like oligopolies and pollution?

END - the last study guide question will be 269.  Be prepared for a 50 question exam based on the above study guide questions on the first day of the new semester.