Chapter Summary: The Power Of Organized Interests

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The book is composed of thirteen chapters and epilogue and economist talks about capitalism and economic decisions in detail. The first chapter (The Power of Markets) says the economy is study that helps us to make the most out of our lives. People want to maximize utility by decreasing costs and increasing demand. The market economy directs resources to the point where they can maximize productivity. Firms also attempt to maximize profit by taking raw materials and adding values and to make the most money in the long run by finding the optimal balance between price and output. While trying to maximize profit, we improve overall well being of society. Some markets have barriers to entry like monopoly. In fixed-price market systems, each …show more content…
Basic economics gives a fundamental base of rules. Save, invest, Repeat is the first advice and this warns us about limited capital. The second advice is to take risk and earn reward. Third one is to diversify and the forth advice is to invest for the long run. The chapter 8’s title is “The Power of Organized Interests.” Benefits focus in a small group and costs of society are spread over large, unorganized group. Also capitalism destroys old conventions and creates new structures. If people try to keep old structures, then economy will slow down. The chapter 9 talks about how to “keep(ing) score” in economy. GDP is the total value of all goods and services produced and it explains inflation. GDP per capita beans GDP / Nation’s population. Consumer spends less when they face a shock in their income. Also, the government can encourage the economy by cutting taxes. There are several signs that indicate the economy’s condition. Unemployment, poverty, income inequality, size of the government, budget deficit and surplus, current account surplus/deficit, national savings, demographics, and total national happiness are the indicators of …show more content…
To increase the production level, people have to work longer hours, firms need to add new workers, add machines and other kinds of capital that help us to produce, and produce more with what we already with. The government should balance a rate of economic growth. Money allows us to exchange and has purchasing power. Inflation is the rise of the average prices and it can be also seen as the purchasing power of the dollar is decreasing. Hyperinflation makes money worthless and moderate inflation can make the cash to lose its value. There is a difference between real and nominal interest rate: A nominal rate is used for calculating the money you have to pay back and a real interest rate accounts inflation and reflects the true cost of renting capital. Inflation and deflation is both bad but latter one is

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