When the government prevents prices from adjusting naturally to supply and demand, efficiency is improved in the economy. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxviii]. A market economy cannot possibly produce a socially desirable outcome because individuals are motivated by their own selfish interests. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxix]. While the invisible hand cannot guarantee efficiency, it is better at guaranteeing equity.
Welfare: Prevents non-rich from accessing needed goods, but incentivizes suppliers to send more b. Liberty: Diminished purchasing power diminishes reach of freedom of buyers, but allowing “gouging” respects freedom of retails to sell at the price the market dictates c. Virtue: “Gougers” seem to be taking unfair advantage of customers, which seems to be a mark of less than admirable personality traits – greediness, selfishness, a lack of compassion, etc. 2. Refusing to award the Purple Heart to Veterans suffering
Hoover’s economic philosophy was restrictive monetary policy and free market. Restrictive monetary policy is limiting currency to prevent inflation. In other words, not putting money into circulation or giving out loans to protect the value of the dollar. If not many people have money the value of the dollar goes up. Care for yourself and don’t depend on the government was his belief.
The theory is that jobs are lost when we are tempted by cheap foreign goods. The true effect of protectionism is it reduces consumer choice, raises prices of protected foreign products and domestic goods. This lowers worldwide production and may save some jobs in a specific industry within America but this comes at an expense of the total welfare of the country. Free trade would provide lower prices, higher-quality goods, economic growth, and competition. This policy eliminates competition and competition is needed for a balanced economy.
If the IRR is less than the WACC, the project should be rejected, as it impoverishes the firm’s owners. If the IRR equals the WACC, it earns only normal profits (i.e., the owners’ opportunity costs) and accepting it is a matter of indifference. In this care the project’s IRR is 18.031 > 11.88%, therefore the IRR rule tells us the same as the NPV rule: this project will enrich the firm’s owners. We note in passing that in more advanced courses in finance you would learn about projects for which this rule cannot be used. Broadly speaking, they are projects whose cash flows changes sign more than once—e.g., from negative to positive to negative again.
This cartoon is a prime example of what happens when a trickle-down economy fails to work. Trickle-down economics is anti-liberal as it is a form of government intervention in the economy. As the government tax the wealthy less they provide no benefit for the country, they are only widening the gap between the rich and the poor. By widening the gap they are restricting the political and economic freedom of the citizens. This restriction on the citizens goes against two of the three freedoms (social, economic, political) classical liberalism was founded on.
While at a glance each of these programs may seem harmless, Dr. Spencer illustrates why he believes America’s economy is declining because of the current system. Dr. Spencer states,” The most useful role of government in the economy is to make sure people –especially companies and businesses-play by the rules.” Anti-trust laws for example provide rules that prevent monopolies in the market. Many of the programs the government enacts stall the natural effects of supply and demand that drive a free market and are in fact monopolies. As is
In terms of consumerism, the good life is damaging to the environment, places too much emphasis on money, and it dwindles the importance of non-market values. According to Annie Leonard’s “The Story of Stuff”, our current materials economy is a commodity chain in which goods go from extraction, to production, to distribution, to consumption, and finally to disposal. The system sounds stable but it is actually in crisis. Anyone with a simple understanding of mathematics can tell you that you cannot run a linear system on a finite planet in the real world. In order for us, the consumers, to get all of our fancy products and up-to-date technologies, a process that we turn a blind eye to takes place.
Entities such as the Group of Seven, or the G7, and the World Trade Organization, have created programs to lessen the gap between the wealthiest and poorest areas of the world. It has failed to progress the poorer nations of the world economically when “the leaders of the industrial world do make the rules, a power that is exercised in part to ensure the continuing wealth and power of the industrialized world.” (Marks, pg. 44) This hierarchical effect of the wealthy determining the economic fates of the poor has had little effectiveness in narrowing the gap between the haves and the have-nots. Instead, the developing countries are creating several treaties and alliances such as the North American Treaty Organization exclude entrance by the under-developed nations. This further expands the reign and monopoly of the western world by excluding influence from the economic weak.