Important Concepts in Understanding Macroeconomics

Important Concepts in Understanding Macroeconomics
1. People tend to readily accept information that supports their current beliefs and may be hypercritical of evidence that contradicts those beliefs.
2. Correlation does not imply causation.
3. Politicians use economists as hired guns.
4. Economists do not have the solutions to all the world's problems. However, economists point out that many of our economic and social policies are poor choices.
5. Money does not buy happiness.
6. If you want a financially comfortable retirement, then start saving as soon as possible in order to receive maximum benefit from compound interest.
7. Most economies rely heavily on markets to allocate resources and products because they are usually more efficient than systems that rely heavily on tradition and command.
8. Markets are not perfect. Market failures occur when the marketplace fails to provide socially desirable outcomes.
9. Governments can improve some market outcomes.
10. The primary distinction between traditional conservatives and traditional liberals is the difference in their attitudes toward government.
11. Traditional conservatives believe government, and thus taxes, should be relatively small.
12. Traditional liberals believe government, and thus taxes, should be relatively large.
13. The three primary macroeconomic policy goals are economic growth, low unemployment and low inflation.
14. Increased trade with the rest of the world and investments in physical capital, education, and technology are the keys to increased productivity and economic growth.
15. Relatively high rates of unemployment and inflation reduce economic growth and result in a lower standard of living than would occur in their absence.
16. Unemployment occurs when there is not enough spending in the economy.
17. Inflation occurs when there is too much spending in the economy.
18. The government plays an active role in managing the economy by using monetary and fiscal policies to influence the amount of spending in the economy.
19. Monetary policy is the Federal Reserve System's use of the banking system to alter the money supply and interest rates to influence overall spending in the economy.
20. One of the most powerful people in the world in the chairman of the Board of Governors of the Federal Reserve System.
21. Fiscal policy is taxation and government spending.
22. Fiscal policy has a large political bias because politicians are reluctant to increase taxes or cut spending on constituents.
23. The U.S. political system is biased toward fiscal irresponsibility.
24. The public debt is the accumulation of federal budget deficits over time.
25. Entitlement programs, such as Social Security, Medicare, and Medicaid, will become an increasing portion of federal government spending unless modifications are made.