"Naked Economics" Study Guide

Your quiz on NE will focus on these areas, however I reserve the right to ask questions that may not be specifically taken from a page listed below. here is not substitute for reading the assigned chapters!!! "hapter #$ he %ower of &arkets &arket allocation ' (ssume rational utility$ma)imizers * +pportunity costs , %rofit ma) ## %rices allocate resources #.arriers to entry #/ &arket price, pricing decision 0 price discrimination #1 2essons of markets #3 "hapter - 4 Incentives &atter 5rong incentives lead to undesirable outcomes -' %rincipal$agent problem '6 %risoners dilemma '/ "reative destruction '* a) 0 govt program disincentives '3 "hapter ' 4 7overnment and the Economy E)ternalities /' 7ovt solutions to e)ternalities /3 7ovt makes market economy possible 4 rights, laws, regulations 1# %ublic goods 18 9edistribution 1, "hapter / 4 7overnment and the Economy II 7ovt inefficiency *' 7ovt allocation vs private allocation *8 Effects of regulation *, Effects of ta)ation 8/ :ummary 83 "hapter 1 4 Economics of Information (dverse selection 3# ;irm screening 3, .randing provides information ,6 .randing versus commodities ,:ignaling mechanisms ,' "hapter * 4 %roductivity and <uman "apital <uman capital ,3 =ob creation #6' Effects of human capital on standard of living #61 %roductivity #68 Income inequality ###

"hapter 8 4 ;inancial &arkets %urposes of financial instruments ##3 Efficient markets 0 inde) funds #-* Investment guidelines #'"hapter 3 4 he %ower of +rganized Interests Interest groups 0 politicians> incentives #'8 :ome regulations benefit business #/yranny of the status quo #// "hapter , 4 ?eeping :core 7@%A importance, real vs nominal, per capita #16 7@% growth 0 wage growth #17@% misses social progress #1/ 9ecessions #1* ;iscal 0 monetary policy #13 +ther Bvital signsCA unemployment, poverty, inequality, govt budget, deficit, current acct, national savings, demographics #*6 "hapter #6 4 he ;ederal 9eserve Importance of ;ed #*3 Easy money causes inflation #86 ;+&" 0 monetary policy tools #8@ifficulty of policy decision$making #81 &oney #8* Inflation 0 effects #8, %olitical pressure to allow inflation #3@eflation #3/ "hapter ## 4 rade and 7lobalization .enefits of trade #38 "omparative advantage 0 specialization #,6 2osers from trade #,# %rotectionism #,' rade raises real incomes #,1 rade benefits for poor countries #,* "ultural homogenization #,, :weatshops -6# "hapter #- 4 @evelopment Economics Importance of policies Dvs resourcesE -6* Effective development policies -63 E)change rates -#8 I&; --1