Introduction A key policy question is how do households respond to the incentives presented in the U.S. tax code? We will examine: Labor supply -Saving Housing Portfolio Composition

Introduction Many policies center around whether the tax burden is distributed fairly. Not as simple as analyzing how much in taxes each person actually paid, because of tax-induced changes to price

What's Special About Health Care? Health care costs are large and growing fast Number of reasons why First Welfare Theorem may be violated Poor information(physician induced demand) Adverse selection and moral hazard Disease externalities

Social Insurance Programs Generally share 4 characteristics: Participation is mandatory Eligibility and benefits depend on prior contributions Benefits begin with an identifiable occurrence Programs are not means-tested

Political Economy Defined Political Economy is the application of economic principles to the analysis of political decision making. -elf- -interestin- the marketplace, this often leads to efficiency; different implications in \political market. Maximization-one goal may be to maximize social welfare

Public Goods Defined Pure public goods share two characteristics Nonrival Cost of another person consuming the good is zero Nonexcludable-Very expensive to prevent others from consuming the good

Public Finance Defined Public finance is about the taxing and spending activities of the government. Also known as \public sector economics\or \public economics.\ Focus is on microeconomic functions of government- polices that affect overall unemployment or price levels are left for macroeconomics

What is money? Notes Coins Current deposits （活期存款） other deposits with banks（银行的其它存款） Currency(现金) M3 = C + D

Microeconomics Microeconomics(微观经济学) is the study of how individual households and firms make decisions and how they interact with one another in markets

Real GDP versus Money GDP (实际GDP和名义GDP) Money GDP/Nominal GDP(名义GDP) values the production of goods and services at current prices(以现价). Real GDP(实际GDP) values the production of goods and services at constant prices(以不变价格)