Chapter one: The Ten Principles of Economics. This chapter was a brief introduction of the ten principles, so I can only imagine what is to come as we delve deeper into the world of micro.
Something in this chapter that made me think about an economic concept differently than my previous beliefs was the concept of a short-run trade-off between inflation and unemployment. Now, I admit I am no genius in economics. In fact before studying Principles of Macro I had very limited knowledge on the subject. But before even knowing the theories or terms, I have been a believer in "the invisible hand," so trying to see the positive side of government control has always been a bit challenging for me. However I do find it interesting to open up my perspective and entertain new ideas.
According to short-run trade-off between inflation and unemployement when inflation is high, unemployement is low and vice versa. The government/Federal reserve manipulates the money supply: if a lot of money is printed, government spending is increased, taxes lowered, etc. it stimulates the economy and reduces unemployement but leads to inflation in the long run. On the contrary, if the money supply is retracted, government spending cut, taxes raised, it would raise unemployement but reduce inflation in the long run.
Mathematically, this seems logical.
I guess when it comes to "controlling" our economy I just need a little more convincing. I suppose I'm still a believer of letting the marketplace self-regulate. Old fashioned idea to some, I know.
New questions I have after reading this chapter would all have to do with monetary policy, mostly because I don't know too much about it. I wonder just how often these policies are put into effect; monthly, daily, hourly? And also, are they really working?
That is all for now...
Ciao!
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