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Econ Study GuideHans Rosling vs Richard WilkinsonRosling● Life expectancy○ Around the 1800s, all countries were sick and poor with an average lifeexpectancy of below 40 years old○ Industrial revolution increased wealth and life expectancy in westerncountries.○ Countries facing colonization had little to no growth.○ With increase in wealth came the increase in life expectancy.○ However there are still great differences in different parts of each country.(same point as Wilkinson)Wilkinson● Life expectancy○ At a certain point income has no effect on life expectancy○ Within our societies, there is a prominent relationship between lifeexpectancy and wealth.○ The gap between the richest and the poorest show the apparent socialissues (literacy, infant mortality, imprisonment)○ The average wellbeing is not dependent on income anymoreSimilarities● Both agree that increasing income does not always result in a proportionateincrease in life expectancy.Cyclical vs Secular Trends in Time Series Data● Cyclical Trends - exhibit behavior that is apparently linked to seasonal orbusiness cycle phenomena.○ Peak → recession → trough → recovery → expansion○ where a business opportunity generates new companies or products thatreap good profits, those profits bring in copy-cat competitors that kill offthe profits, a bunch of the companies then go under, consequentlyreducing supply, and then the cycle repeats.○ unemployment caused by macroeconomic conditions: business cycleBoom- jobs created, recession- laid off● Secular trends - transcend cyclical patterns○ likely to continue moving in the same general direction for the foreseeablefutureSources of Inflation● Aggregate demand - demand for all goods. (a measurement of the total amount ofdemand for all finished goods and services produced in an economy)● Aggregate supply - Supply for all goods in the economy. (the total supply of goods andservices produced within an economy at a given overall price in a given period)● Demand pull: Demand increase: GPD increase; higher pricesex.) Increase in spending causes the demand curve to shift outwards● Cost-push: Supply decrease: GDP decrease, higher prices○ An increase in the cost of production○ Increase in oil prices = more expensive to produce/transportRedistributive Consequences of Inflation● Increase in prices = larger inflation, but it’s an average● Price effects - a concept that looks at the effect of market prices on consumer demand.○ People who tend to buy goods and services that are increasing in price the fastestend up with fewer goods and service (they’re hurt)○ ex.) a decrease in the purchase of goods and services preferred by people due toan increase in their price● Income effects - the change in the consumption of goods based on income.○ People whose nominal income rises more slowly than inflation end up with fewergoods and services because they can't afford it.○ Drug companies, minimum wage● Wealth effects - people spend more as the value of their assets rise.○ If asset value increases higher than inflation rate, end up with higher wealth.○ Hurts lenders if inflation is higher than anticipated○ Deflation devastated debtors○ Debt: borrowers benefit, loaners

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UMass Amherst ECON 104 - Econ Study Guide

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