Econ 402 - midterm 1

Decision to vote equation

(P x NCD + D) > C

P - Probability of Decisiveness

The probability that one individual’s vote will affect the outcome of the election

NCD - Net Candidate Differential

The net benefits of one candidate over the perspetive of the individual voter

D - Civic Duty

The satisfaction that the voter gets from itself

C - Cost of Voting

All costs involved in voting

Special interest Groups

Laws that get passed have conccentrated benefits and diffuse costs

Rent seeking

Using government coercion to seek benefits at the expense of other people

Range of Indeterminacy

Range of potential prices

Federalism

A system of government that divides power between a national government and regional state or provincial governments

Separation of powers

A constiutional doctrine that divides state authority into distinct branches

Powers granted to congress by the constitution

Declaring war, regulating interstate commerce, coining money

Gresham’s Law

This means that when people have two types of money that are legally required to have the same face value, they will spend the less valuable money (the "bad" money) and save or hide the more valuable money (the "good" money). Eventually, the good money disappears from everyday use

Insolvent

The state of being unable to pay debts

Fractional reserve banking

Financial system where banks keep only a fraction of their deposits liquid. The rest is loaned out to make a profit

When did private banks start issuing currency, and why?

Private banks began issuing paper currency in colonial America during the 1700s,

Why:

• The US did not have enough gold and silver coins to support its growing economy.

• Private banks issued paper money called banknotes, which could generally be exchanged for gold or silver.

• These banknotes made buying, selling, and lending money easier.

When did we switch to a national bank and why?

Before the Civil War:

• Different private banks issued different paper currencies.

• Some banknotes were unreliable or traded below their face value.

• Bank failures and runs created financial instability.

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The National Banking Acts (1863-1864) helped create a more uniform national currency and provided a way to finance the Civil War.

Why did the American bimetallic system (1793) encourage gold to disappear from circulation?

• Legal value: 1 gold = 15 silver

• Market value: 1 gold = 15.5 silver

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This meant gold was undervalued and silver was overvalued.

Who is Samuel Slater and why is he relevant to this course?

• Arrived in America in 1789 with knowledge of British textile machinery.

• Helped establish a successful water-powered cotton-spinning operation in Rhode Island in 1790.

• Helped spread the factory system throughout the Northeast.

What is owner capital?

Portion of a bank’s assets that belong to its owners after subtracting what the bank owes

Bank Timeline

• 1791: First Bank established.

• 1816: Second Bank established.

• 1836: Second Bank's federal charter expired

why are customer deposits considered liabilities?

Customer deposits are considered liabilities because the bank owes that money to its customers.

Who was James Wilson?

Founding father. He believed the Constitution could create opportunities to eventually eliminate slavery.He hoped Congress would prevent slavery from spreading into new territories.

What was the Louisiana Purchase?

The Missouri Compromise of 1820 restricted slavery in much of the Louisiana Purchase territory, while allowing it in Missouri.

Pecuniary Harm

Harm involving money or financial loss. Undercompensation for the value of labor.

Non-pecuniary Harm

Pain, suffering, coercion, and unpleasant working conditions.

Free Labor

Workers have the freedom to choose their employer, negotiate compensation, and quit

Unpaid Labor

Work performed without monetary payment. It may be voluntary or involuntary

Unfree Labor

Work performed without the freedom to refuse or leave.

Purpose of the 13th amendment

abolished slavery and involuntary servitude throughout the United States, except as punishment for a crime following a lawful conviction.

Purpose of the 14th amendment

established constitutional protections such as citizenship, due process, and equal protection

Purpose of the Black Codes

Black Codes were discriminatory laws enacted by Southern states after the Civil War to restrict the freedom of Black Americans.

They were designed to preserve white economic and social control after slavery ended.

Procedural Due Process

Focuses on how the government acts. Government must provide required notice and a fair opportunity to be heard before taking certain actions

Substantive Due Process

Focuses on what government can legally do. A law violating a constitutionally protected fundamental liberty may be invalid even if fairly enforced

Hepburn v. Griswold

The Supreme Court ruled 5-3 that Congress could not constitutionally make greenbacks legal tender for debts contracted before the Legal Tender Act.

Chief Justice Salmon P. Chase argued that Congress's power to coin money did not necessarily give it the power to force creditors to accept paper currency for existing debts.

Knox v. Lee

The Supreme Court reversed its earlier position and ruled 5-4 that Congress could make greenbacks legal tender, including for preexisting debts.

The Court adopted a broader interpretation of federal monetary powers.

National Banking Act of 1863,

• Bank starts with $100,000: This could be existing national currency, gold, or other accepted money.

• Bank buys $100,000 in government bonds: It pays the government using that existing money.

• Bank deposits the bonds with the Treasury: The bonds serve as collateral.

• Treasury provides up to $90,000 in newly printed national banknotes: These are the notes the bank is authorized to issue.

• The bank circulates those notes: Customers can receive them as cash or through loans.
  
  Solved 2 problems: not having standardized money and giving money to the government so they can finance the civil war

Standard Oil’s

Lower costs through mass production and integration; dominant market share

Economies of scale

Producing large quantities helped reduce average costs.

Vertical integration

Controlled multiple stages of oil production, transportation, refining, and distribution.

Horizontal integration

Acquired or consolidated competing refineries.

Improved efficiency

Used large-scale operations and technology to reduce refining and distribution costs.