Trade, Money and Capital

B. TRADE, MONEY AND CAPITAL Features of a modern providence 1. Specialization and division of labor 2. Measure economic values 3. line of work of capital * Trade, specialization and division of labor. * Specialization occurs when passel and countries concentrate their efforts on a particular set of tasks, it permits each person and country to character to best advantage the specific skills and resources that argon available. * Division of labor dividing intersection into a number of small-specialized steps or task. * Specialization and trade be the key to high living standards. * Globalization Globalization is holdd to consult an increase in economic integration among nations. Increasing integration is seen today in the dramatic growth in the glows of rights, services, and finance across content borders. * Money the lubri domiciliatet of exchange * Money is the means of payment in the form of currency and checks used to buy things. Lubricant that facilitates exchange. * Governments support the bills tag on through their center banks * Money is the medium of exchange.Proper management of the pecuniary system is one of the major issues for judicature macroeconomic policy in the countries. Capital * Capital a produced and durable input, which is itself an issue of the sparing. It consists of a grand and specialized array of machines, buildings, computers, softw ar, and so on. * Capital has to be produced before you use it. * Growth from the sacrifice of current utilisation * Economic activity pick ups apostasy current consumption to increase our capital. Every time we invest we are enhancing the future productivity of our economy and increasing future consumption. * Capital and nonpublic berth In a market economy, capital typically is in private owned, and the income form capital goes to individuals. * Capital goods also have market values, and people can buy and sell the capital good for whatever expenditure the goods will fetch. * Th e ability of individuals to own and profit from capital is what gives capitalism name. * spell our society is one built on private property, property rights are limited (taxes and brass) *Property rights for capital and pollution * Property rights define how individuals or profligates can own, buy, sell, and use capital goods and other property. An efficient and acceptable good framework for a market economy includes the definition of clear property rights, the laws of contracts, and system for adjudicating disputes. C. THE VISIBLE HAND OF GOVERNMENT. * All goods and services are willful exchange for gold at competitive market bells that reflect consumer military rank and social costs. * No economy actually conforms totally to the idealized innovation of the smoothly functioning invisible hand. * Economic imperfections lead to such ills as pollution, unemployment, financial panics, and extremes of wealth and poverty. Governments operate by requiring people to pay taxes, co me after regulations, and consume certain learnive goods and services. * Government have 3 main economic functions in a market economy * Increase faculty (public goods) * Promote equity (taxes) *Foster macroeconomic stability and growth (economic growth) * talent * Perfect contention Refers to a market in which no firm or consumer is large enough to affect the market price. * Imperfect competition When buyer or seller can affect a goods prices. Leads to prices that rise above cost and to consumer purchases that are reduced on a lower floor efficient levels. Monopolist a singles supplier who alone determines the price of particular good or service. * Externalities * Externalities (or spillover effects) occur when firms or people obligate costs or benefits on others outside the marketplace. * Government regulations are intentional to control externalities like air and water pollution damage from take apart mining, hazardous wastes, unsafe drugs and foods, and radioactive materi als. * Public Goods * Public goods are commodities, which can be enjoyed by everyone, and form, which no one can be excluded (national defense). * Taxes The government must find the revenues to pay for its public goods and for its income restatistical distribution programs. *All levels of government collect taxes to pay for their spending. * Taxes are the price that we pay for public goods * They are involuntary. * equity * Markets do not necessarily produce a fair distribution income. A market economy may produce inequalities in income and consumption that are no t acceptable to the electorate. * The reason is that incomes are indomitable by a wide variety of factors, including effort, education, inheritance, factor price, and luck. To reduce income contrast * Engage in progressive taxation taxing large incomes at a higher rate than small incomes. * Transfer payments which are money payments to people. * Macroeconomic growth and stability * Thanks John Maynard Keynes we know how to control the worst excess of business cycle. By careful use of financial an monetary polices, governments can affect output, employment, and inflation *The fiscal polices of government involve the power to tax and the power to pend. * Monetary policy involves determining the supply of money and interest rates. Macroeconomics polices for stabilization and economic growth include fiscal polices along with monetary polices. * Mixed economy in which the market determines output and prices in most individual sectors while government steers the overall economy with programs of taxation, spending, and monetary regulation. * The rise of the welfare state * Laissez-faire (leave us alone) holds that government should interfere as a little as possible in economic affairs and leave economic decisions to the private decision make of buyers and sellers. Welfare state is one un which markets direct the detailed activities of day-to-day economic life while government regulates social condition s and provides pension, health care, and other necessities for unforesightful families. * The mixed economies. * The success of market economies may lead people to drop the important contribution of collective actions. * The tools of economics are indispensable to back up societies find the golden mean between an efficient market instrument and publicly decide regulation and redistribution * The good mixed economy is perforce the limited mixed economy