CHAPTER 1. THE NATURE OF ECONOMICS I. Definition Economics is a social science concerned with the efficient utilization of scarce resources, in order to maximally satisfy society's unlimited wants. II. Functions of Economics The production, distribution, and consumption of goods and services. III. Benefits of Economics A. Most historical, social, and economic changes have economic backgrounds. B. Governments are increasingly relying on economists for decision-making. C. Economics teaches us that in the real world every decision …showed first 75 words of 7615 total…

…showed last 75 words of 7615 total…is variable 4. Velocity is stable 5. Steep investment D. curve 5. Flat investm. D. curve 6. GNP = C + I + G 6. MV = PQ Aggregate S Aggreg. D. Aggreg. S. Aggreg. D. 7. Requires higher taxes 7. No tax increase needed 8. Politically harmful 8. Politically acceptable 9. Uses the "stick", effective 9. Uses the "carrot", less effective XI. Effect of Higher Money Supply Relationship between M1 expansion and inflation (p.377) XII. FED Target Choice Money supply and interest rate targets cannot be pursued simultaneously. (p. 380)