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Antitrust Policy and Monopsony Power

As we discuss in Microeconomics and Economics, Chapter 15, Section 15.6, the U.S. Department of Justice’s Antitrust Division and the Federal Trade Commission have merger guidelines that they typically follow when deciding whether to oppose a merger between two firms in the same industry—these mergers are called horizontal mergers. The guidelines are focused on the effect a potential merger … Continue readingAntitrust Policy and Monopsony Power

The Economics of Sneaker Reselling

Buying athletic shoes and reselling them for a higher price has become a popular way for some people to make money. The mostly young entrepreneurs involved in this business are often called sneakerheads.  Note that economists call buying a product at a low price and reselling it at a high price arbitrage.  The profits received from engaging in … Continue reading “The Economics of Sneaker Reselling”

Senator Elizabeth Warren vs. Economist Lawrence Summers on Monetary Policy

As we’ve discussed in several previous blog posts, in early 2021 Lawrence Summers, professor of economics at Harvard and secretary of the treasury in the Clinton administration, argued that the Biden administration’s $1.9 trillion American Rescue Plan, enacted in March, was likely to cause a sharp acceleration in inflation. When inflation began to rapidly increase, … Continue reading “Senator Elizabeth Warren vs. Economist Lawrence Summers on Monetary Policy”

Solved Problem: High Prices and High Revenue in the U.S. Car Industry

Supports: Microeconomics, Chapter 6, Section 6.3 and Chapter 15, Section 15.6, Economics Chapter 6, Section 6.3 Chapter 15, Section 15, and Essentials of Economics, Chapter 7, Section 7.7 and Chapter 10, Section 10.5. In July 2022, an article in the Wall Street Journal noted that “The chip shortage and broader supply constraints have hampered vehicle production … Many major car companies on Friday reported U.S. … Continue reading “Solved Problem: High Prices and High Revenue in the U.S. Car Industry”

Be Careful When Interpreting Macroeconomic Data at the Beginning of a Recession

On Friday, July 8, the Bureau of Labor Statistics (BLS) released its monthly “Employment Situation” report for June 2022. The BLS estimated that nonfarm employment had increased by 372,000 during the month. That number was well above what economic forecasters had expected and seemed inconsistent with other macroeconomic data that showed the U.S. economy slowing. … Continue reading “Be Careful When Interpreting Macroeconomic Data at the Beginning of a Recession”

Was the High Inflation of 2021–2022 Due to Shifts in Aggregate Demand or Shifts in Aggregate Supply?

To answer the question in the title:  Negative supply shocks—shifts to the left in the short-run aggregate supply (SRSAS) curve—and positive demand shocks—shifts to the right in the aggregate demand (AD) curve—both contributed to the acceleration in inflation that began in the spring of 2021. But were the aggregate supply shifts, such as the semiconductor shortage that … Continue reading “Was the High Inflation of 2021–2022 Due to Shifts in Aggregate Demand or Shifts in Aggregate Supply?”

Are the Fed’s Forecasts of Inflation and Unemployment Inconsistent?

Four times per year, the members of the Federal Reserve’s Federal Open Market Committee (FOMC) publish their projections, or forecasts, of the values of the inflation rate, the unemployment, and changes in real gross domestic product (GDP) for the current year, each of the following two years, and for the “longer run.”  The following table, released … Continue reading “Are the Fed’s Forecasts of Inflation and Unemployment Inconsistent?”

Does Majoring in Economics Increase Your Income?

Studying economics provides students in any major with useful tools for understanding business decision making and for evaluating government policies. As we discuss in Chapter 1, Section 1.5 of Microeconomics, Macroeconomics, and Economics, majoring in economics can lead to a career in business, government, or at nonprofit organizations. Many students considering majoring in economics are … Continue reading “Does Majoring in Economics Increase Your Income?”

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