The Economics Book

199 situation increases incomes and has a large, predictable effect on consumption, restoring the economy to full employment. In ...

200 MONETARIST POLICY income and consume only a small share of their total income; those with the lowest incomes will have negat ...

POST-WAR ECONOMICS 201 employment when unemployment is at this natural rate. If governments spend money to reduce unemployment b ...

202 THE MORE PEOPLE AT WORK, THE HIGHER THEIR BILLS INFLATION AND UNEMPLOYMENT F or 30 years after World War II the world’s more ...

203 The Phillips Curve shows the correlation between unemployment and the rate of inflation. As unemployment goes down, inflatio ...

204 PEOPLE SMOOTH CONSUMPTION OVER THEIR LIFE SPANS SAVING TO SPEND I n 1936, John Maynard Keynes’s The General Theory of Employ ...

205 Retirement is only enjoyable when we have funds to replace our income. Franco Modigliani said that our awareness of this mak ...

206 INSTITUTIONS MATTER INSTITUTIONS IN ECONOMICS S tandard economics assumes the existence of markets. It also assumes that gov ...

207 The German Bundestag (parliament) was a new institution set up after 1945. Its role was important in shaping post-war German ...

208 PEOPLE WILL AVOID WORK IF THEY CAN MARKET INFORMATION AND INCENTIVES T he standard model of economic behavior, first set out ...

209 Travel insurance may encourage vacationers to try out more hazardous activities. As a result insurance firms raise the price ...

210 THEORIES ABOUT MARKET EFFICIENCY REQUIRE MANY ASSUMPTIONS MARKETS AND SOCIAL OUTCOMES B y the 1860s and 70s mainstream econo ...

211 See also: Free market economics 54–61 ■ Economic equilibrium 118–23 ■ Efficiency and fairness 130–31 ■ The theory of the sec ...

212 It was known that a single market could achieve this balance, or equilibrium, but it was not clear that a whole set of marke ...

213 Equilibrium models failed to predict the crisis of 2008, which began when Lehman Brothers Bank collapsed and fired all its s ...

214 THERE IS NO PERFECT VOTING SYSTEM SOCIAL CHOICE THEORY A t a first glance, the mathematics of voting may seem to have little ...

215 The right to vote at the ballot box, shown here in 19th-century France, is entrenched in Western civilization and almost uni ...

216 THE AIM IS TO MAXIMIZE HAPPINESS, NOT INCOME THE ECONOMICS OF HAPPINESS T he first modern national accounts for a country we ...

217 size of the task. It became possible only through developments in statistics, survey techniques, and studies of the whole ec ...

218 different countries did not vary greatly, despite large differences in national income. People in rich countries were not ne ...