I wonder how many people in countries like the United States , Switzerland , South Korea, Brazil , Canada , Russia , and China
Say what? You must be crazy, you say! Prices are not falling; they are rising too fast!
Yes, most citizens see their purchases as becoming more expensive when, in actuality, things are becoming relatively less expensive, at least over the last several decades. Of course, the paradox is that although nominal prices (the actual price tags) are, in fact, increasing, nominal income (the average, actual wage) has been growing even faster over the decades. This is a topic that in economics is called “real income” or a macroeconomic measurement that compares a nation’s nominal income growth relative to the nominal growth in prices that the same income buys. In the United States, and virtually every country around the world, nominal income has grown at a faster percentage than nominal prices causing real income to increase, meaning the average American enjoys greater access to more and better goods and services than ever before.
Let’s take some specific facts:
In the United States real median household income grew from $41,318 to $50,811 from 1970 through 2006 for a total percentage gain of 23% (source: Pew Research Center). Both of the aforementioned median household incomes are stated in 2008 or current dollars which makes the comparison now valid. Median household real income is an attempt to quantify the progress that the “middle American” family or typical family has made over time. So, in summary, the median household in America can buy 23% more with their income today than they could in 1970. In other words, relative prices are lower than they have ever been before. Due to productivity (think PPC curve shifts right due to technology, education, more labor, and trade) we are producing more products and services than ever before and anytime there is more of something the price will fall relative to income.
If we look at the same United States
Now let’s get back to the main premise of the title of this blog and the opening assertion that prices are lower than ever. What we are really saying is that you have to benchmark price increases to income increases to really understand whether things are becoming more expensive relatively. The vast majority of products & services are cheaper today in all nations than they have ever been before, which helps explain why more citizens than ever before can afford to own their own, much larger houses, drive more and better cars, have cable and computers, and have much easier access to better healthcare. The reason we are led to believe differently (ie, prices are out of control!) is because we are victims of our own human nature which tend to focus on the problem areas (higher actual or nominal prices) and not the true picture (lower relative prices when compared to income). Most all citizens observe things “at the margin” and quickly notice those products and services that are rising faster than normal like gasoline prices, education, and healthcare! Hey, even gasoline prices are not at an all relative price high. If gasoline prices are restated for inflation they are $2.65 today vs. $3.17 in 1981 and $3.50 in 1918! Hopefully, a 180-degree moment!
Now, you may say to yourself that statistics can lie or mislead and you are sure in your gut that things are getting more expensive relatively. You can try to validate that incorrect “gut feeling” by examining whether a country’s middle class is enjoying less or more products and services. “Real income” really is just a measurement of the quantity and quality of products and services that the median family personally has. The median and average American continually has more actual products & services in the aggregate as U.S.
Now let me introduce one word of caution; over the last 15 years in the United States, there has been an increase in real average incomes of 2.7% per year, but none of those real income gains have accrued to our nation's middle class, working class, or poor, but rather to the more highly educated and skilled. The purchasing power (real incomes) of the middle class is essentially the same as it was in 1996. The primary reasons for this flattening out of real incomes is attributed to increased global competition and increased technology integration into companies, which tends to keep wages down (more supply as middle class workers are less needed). The educated and highly skilled, however, have seen their real incomes increase consistently over that same period.
So fellow APers, my first new car that I bought out of college costing $7,000 was a lot "more expensive" than the first new car of comparable status that you are going to buy for $20,000! Get it?
Review Questions:
1. Before reading this blog, did you have an impression created by the media that the average American was somehow worse off economically than 30 or 40 years ago?
2. Why has nominal income grown faster than nominal prices? Hint: the answer is above in the blog and has nothing to do with "money".
3. In Fairfax County, have prices relative to income caused product prices to be relatively more or less expensive than the rest of the United States? Hint: you can get the correct answer if you trust your observation and know what real income really is...no research is necessary!
4. What has happened to the purchasing power or real income of the working & middle class in America over the last 15 years? What has caused this leveling out in their standard of living? Do you have any recommendations or policy actions that you would take if you were President?
5. Can you explain the "car riddle" in the very last paragraph of the blog?
1. I did because on the news, the media always portrays society as if it is barely hanging on. News stations always interview undereducated often times unskilled workers to depict "rough times".
ReplyDelete2. Nominal income has grown faster than nominal prices due to increased productivity. This includes better technology, more education, more labor, and trade.
3. Prices in Fairfax county are lower than the rest of the United States. The "high" prices we see are relative to our incomes. Since Fairfax County is a very educated, skilled, and competitive area, the real income is very high. This means that residents in Fairfax county can afford the high prices.
4. The real income of the middle class in the past 15 years has not changed very much. This is because there is an increase in global competition and increased technological integration into companies which tends to keep wages down. If I were president I would encourage these middle class families to strive for a higher education so they can be more competitive and get into a higher income work field.
5. The car you bought out of college was more expensive because your real income was lower back then than it is now. Not to mention you just got out of college so you did not have too much income to begin with. The $20,000 car is less expensive because our real incomes have increased so much that we can afford products like that even though their nominal price has increase so much.
Review Questions:
ReplyDelete1. Yes, I had an impression created by the media that the average American was worse off economically than 30 to 40 years ago. I remember watching videos in History class about how everything used to be "so much cheaper", how burgers used to cost 10 cents, and gasoline used to cost $1. However, now I realize that this may have been considered 'expensive' based on the income that families made many years ago.
2. Nominal income has increased due to productivity because of technology, education, more labor, and trade.
3. Fairfax county is currently known as one of the richest counties. Prices here are higher than in other areas of the Unite States, however, the prices are technically less expensive because we earn much more than other counties/areas do.
4. There has not been much of a change to the real income of the middle and working class over the past fifteen years because the United States has a very competitive work force. However, the better education you get, the more money you will most likely make. The real income of upper class families has risen because they have sought after higher degrees and a better education, so if I were president I would recommend that middle and working class families strive for a better education so they can compete with those who are more qualified for more jobs.
5. Yes. The $7,000 car you bought out of college was much more expensive than the $20,000 car you bought today because back then, $7,000 was worth a lot based on your income. The average income was much lower, which meant prices were lower. Today, the average income is much higher, so prices rise with the income as well.
1) Yes, I had a strong impression that the average American was worse off now than thirty years ago because the media presented us with information that misled. Every day, there are articles in the newspaper or magazine that comment on the increase of gas prices, or other material good prices. Also, I hear about prices increasing from everyone. Whenever adults hold a conversation, they all talk about how prices augmented than how they were thirty years ago.
ReplyDelete2) Nominal income has grown faster than nominal prices because of increased productivity. There has been an augment in technology, education, trade, and labor. This results in the Products Possibility Curve shifting to the right
3) Prices in Fairfax County are relatively lower compared to other counties in the United States. The prices are relative to our incomes. Since Fairfax County a very proficient county, the real income is very high. Using these high incomes, we can buy more goods, even though they are expensive compared to other counties. However, those other counties are not as efficient as Fairfax County and they don’t receive as high an income.
4) It has not changed much. There has been slow increase, but not very much. It has not changed much because of the amount of competition that exists. The number of people receiving education has increased, so the middle class has started to grow more competitive. However, the high class has not had as much competition so their purchasing powers have increased making them richer and richer. If I were the President, I would probably enforce a law that says that everyone has to go to college for four years, at least. If they did not have the money to support this, the government would provide some loans and scholarships that would allow students to go to college so that they could earn higher incomes when they graduate and contribute to society as the middle or high class.
5) The car that Mr. Latter bought when he was graduating from college was $7,000 but his real income was also very low. Now, Americans are earning a higher real income. When we buy a car for $20,000, it will be relatively “cheaper” because we will earn a higher real income, due to an increase in average income rates, compared to when Mr. Latter earned an income. Ratio wise with car price and our wages, the car that we buy now for $20,000 is less expensive than the car that Mr. Latter bought for $7,000.
1. Yes, i had an impression that the average American was worse off now because all the news channels, newspapers, internet articles are saying how the prices of the products are increasing such as gasoline, houses, or even just some general products like food etc. Also, I realized that Panera's lemonade got more expensive than last year!! So I definitely had a strong impression of the prices of the products increasing.
ReplyDelete2. The nominal income has grown faster than nominal prices because the productivity has increased due to the improvement of techonlogy, education, more labor, and trade.
3. Fairfax County has relatively lower prices compared to the other counites in the United States. Because Fairfax County has relatively more efficient than the other counties. Therefore the households receive higher income. For this reason, even though the prices on the price tags are high, it is still not expensive for the people in Fairfax County.
4. The purchasing power or real income of the working & middle class has not changed much over the last 15 years. It is mainly because of the increase of global competition and technology integration into companies. This tends to slow the increase of wages because less middleclass workers are needed when there is more supply. This also indicates that higher educated people have their income constantly increasing.
5. When Mr. Latter has just graduated from college, his income was probably lower than we will eventually receive. Therefore Mr. Latter's first car ($7,000) was relatively more expensive than the cars we buy for $20,000
1. I did not have the impression that we were economically worse off before than we are now because we went over this several times during class. However, before I took this class, the media did convince me that prices were much lower back then, therefore we were doing better economically.
ReplyDelete2. Nominal growth has grown faster than nominal prices because of increased productivity (for example better technology, education, trade, etc.)
3. The prices in Fairfax County are relatively less expensive compared to the rest of the United States. Fairfax County is known for being a very educated and productive county, resulting is a greater nominal growth. In addition, our real income is very high compared to other counties, so our prices relative to our income are less expensive.
4. There has been little change in the real income of the working and middle class in America over the last 15 years. This is because of increased global competition and increased technology integration, making middle class workers less needed since the machines will do the work instead. If I was president, I would encourage workers to work harder and be more familiar with technology through education.
5. The car you bought in college was more expensive because the “real income” at that time was much lower than today. So even though cars go for $20,000 now, it is relatively less expensive because of such a huge increase in “real income”.
1. Yes, I thought that prices were rising in a way that the average American could not keep up with. All the time in the media, they always focus on the bad things, like, as you mentioned, rising gas prices. All the time, we hear about how things are just getting worse and worse. This blog really surprised me.
ReplyDelete2.The nominal income is rising faster than nominal prices because of more productivity meaning better technology and education, and more labor and trade.
3. I would think that in Fairfax County, when it comes to prices relative to income, things are relatively less expensive. People in Fairfax tend to be pretty well-off financially. Most people who live here have a lot of education and therefore better jobs. Their higher income causes things to be "cheaper" for them.
4. The real income of the working and middle class has not really changed over the last 15 years. The reason it has leveled out is because of increased global competition and increased technology integration in companies which can keep wages down. If I was President, I would probably try a policy that would somehow make higher education more accessible to the American people.
5. The first $7000 car you bought out of college was "more expensive" because your nominal income would be lower than what ours will possibly be when we graduate college. So, the $20,000 car will seem "cheaper" to us.
1. Yes, I did have the impression that the media presented to us that the average American was worse off than one 30 or 40 years ago. I got this impression because the media has implanted in our minds that everything is more expensive than back then and how we are going into a great recession. When you watch “old” movies, people always comment on how inexpensive things were back then. Back then, candy bars were around 25 cents compared to nowadays. The media gives us the impression that the economy is increasing in prices every year.
ReplyDelete2. Nominal prices are increasing compared in the last few decades. However, nominal income has been growing even faster over the decades compared throughout the last few decades. This factor of nominal prices relative to nominal income is called “real income”.
3. Prices in Fairfax County are relatively less expensive compared to the rest of the United States. Because Fairfax Country is rated one of the richest counties in the United States, the nominal income is relatively must higher in Fairfax Country compared to other counties. The prices relative to income have caused product prices to be relative less expensive compared to the rest of the United States.
4. The purchasing power, or real income, of the working and middle class over the last 15 years has relatively stayed the same. The standard of living has leveled out because of new production technologies and ways to create a better standard of living for citizens. In the blog it was stated that, “The educated and highly skilled, however, have seen their real incomes increase consistently over that same period.” To see an improvement in real incomes, people should be driven to go to college and achieve a higher education. If I were president I would increase college loans and subsidies to schools so they can lower the tuition prices so more citizens can go to college.
5. When Mr. Latter bought his first car right out of college that was priced at $7,000, his income was relatively lower than what a normal college student would receive now. Nowadays, a college student would receive a higher nominal income which is compared to the nominal prices. So a $20,000 car, compare to back then, is less expensive relating to incomes.
1.Yes, I did think that we were paying more for things now than we were 30 or 40 years ago. Because gas prices were in the 3 dollar range, a pack of gum is now $1.50 instead of 85 cents.In addition the media makes a big deal out of things getting more expensive especially the price of gas.
ReplyDelete2.Nominal income has grown faster than nominal prices because we are getting more efficient at producing good and services, which keeps prices down. We are getting more efficient because more people are going to college therefore getting jobs as 'skilled workers'(who get paid more)but they also are able to create new and better ways of doing things which in-turn allow us to produce more goods and services.
3. Fairfax county is one of the wealthiest counties in the country. People here have very high incomes. Prices here are higher than most other places in the country, but they are relatively less expensive tan the rest of the nation because are incomes are so high.
4. The middle class's purchasing power has stayed relatively the same because of global competition and new technology that help keep wages down. If Were president I would just say stay in school go to college so you can compete for higher paying jobs.
5. Your car was more expensive back then because your real income was lower. For us the $20,000 will be cheaper because our real incomes will be higher.
1. Yes, I was one of those people fooled by the media into believing that the average American is worse off now then they were 30 or 40 years ago. The media distorts information to make a good story sometimes and that can mislead people into believing the wrong facts. People all the time make comparisons to how gas and movies used to be so cheap back in the day; even I myself have complained and made the same statements about gas and movies being so expensive today.
ReplyDelete2. Nominal income has grown faster than nominal prices due to an increase in productivity. This increase in productivity has allowed us to make more products and services than ever before in our history. We have increased in better and more efficient technology, education, labor, and trade which allows prices to drop in relation to income.
3. Prices relative to income in Fairfax County have caused product prices to be relatively more expense than the rest of the United States. This is because people in Fairfax County hold higher paying jobs and earn more for a living. Since people have higher income, prices are higher because they can afford them. People in other counties may not make as much as people in Fairfax County and if the products were the same price all over, some people in certain areas would not be able to afford it based on their lower level of income.
4. Unfortunately, the real income of the working and middle class of America has not changed or increased too much over the last 15 years. This is due to an increase in competition; people with a higher level of education are more likely to get better paying jobs. Not only that but also the fact that technology has improved over the years and is beginning to replace some jobs that were in the past held by middle and working class Americans. Although there has been a slow pace and small increase in the standard of living for the working and middle class, it has not changed too significantly. The reason there has been a larger increase in the real income of the upper class over the years is because they are acquiring higher levels of education which are allowing them to hold the better paying jobs. If I were president, I would try to create a program that would make it more affordable for middle and working class Americans to be able to achieve a higher education because I don’t think it is necessarily a matter of whether they want more education but rather they might not be able to pay for it.
5. I do understand the car riddle. The reason Mr. Latter’s $7000 car was “more expensive” compared to the $20,000 car that I might buy when I get out of college is because of income. Back then, the real income was at a much lower percentage then it is today. People then were not making nearly as much money as people do today which is why although the $7000 car may seem less expensive in actuality, people had a smaller amount of income so the $7000 car was a lot of money for them. Now, since the real income percentage in much higher because people are earning much higher wages than back then, in comparison to the real income today, the $20,000 car would be relatively cheaper.
1. Yes, the media does a good job of blowing things way out of proportion and scaring the general public. They are not there to educate people; they are there to get ratings.
ReplyDelete2. Nominal income has grown faster than nominal prices because of our productivity. Our Production Possibilities Curve has shifted to the right. This is all because of better technology, more educated people, more labor, and more trade.
3. Fairfax County is one of the richest counties in the nation. Products and services here have higher nominal prices. But this does not mean they are necessarily more expensive, relative to our incomes they are much cheaper. We spend a much smaller portion of our income on these products and services with high nominal prices compared to other areas.
4. The real income of the middle class has not changed much in the last 15 years. This is due to global competition and an increase of technology integrated into companies. The real income of the upper class has increased due to more education or better skilled workers. I’d recommend lower and middle class families to get a higher education so they can better compete with the upper-class and reach higher real income.
5. The $7,000 car you bought had a much lower nominal price than your $20,000 car. But this does not mean it is really cheaper, it’s actually more expensive. Your average income back then was much lower than the income today. Therefore you actually paid more of your income towards your $7,000 car then than you did for the $20,000 today.
1. I did because all the news stations and newspapers make it seem like the United States is about to fall off the edge. They make it seem as if in a few months the United States will no longer be a superpower. The media is blowing things way out of proportion as they always do.
ReplyDelete2. Nominal Income has grown faster than Nominal Prices because of productivity. This increase in productivity includes better technology, labor, education, and trade.
3. People are shocked when they learn that prices in Fairfax County are in relatively low compared to other counties. This is because our incomes are so high we can afford these high prices. All the prices in the county are based off our incomes and the higher that they go the higher the prices will rise.
4. The relative income of the middle class has not changed much over the last 15 years. This is do to the amount of competition that exists in the world. If i were president I would tell the middle class to strive for higher educations so they can get better jobs and increase their standard if living.
5. Your car was more expensive because your relative income was much lower back then. A 7,000 dollar car back then was worth much more than it is today. Today peoples relative incomes are much greater so buying a 20,000 dollar car today would technically cheaper than buying a 7,000 dollar car then.
Francis Rodriguez
ReplyDelete1. No, but that only because I took your basic Econ class last year and you explained this to us, but before then yes I did think we were worse off than 30 or 40 years ago.
2. Nominal income has grown faster than nominal prices because of education, skilled workers, and technology, which have helped in being able to produce more products and because of the greater supply of goods the price of goods have gone down. Education has led to more skilled workers who then earn more income.
3. I feel that product prices in Fairfax county are more expensive than the rest of the US because people in Fairfax county are upper middle class and rich people and so can afford to pay more so products in Fairfax county are more expensive. Now product prices relative to income I feel are less expensive because people in the county make a lot more than the average American and even if the products are a little more expensive relative to income are cheaper.
4. In the last 15 years real income of the middle class has leveled out due to competition in the global market. If I was president I would have no minimum wage or at least lower the minimum wage drastically. Then people in the US could compete with other nation more effectively and goods would become even cheaper.
5. So due to competition and technology goods are a lot cheaper than they were back when you bought a car and so the car I would buy today for 20,000 would be a lot less expensive relative to income and prices.
1. Absolutely, the way that the media projects the current economic situations almost casts the public into a despair, that we are in the deepest hole that we have ever been in. The way that they portray it is extremely negative, focusing on the down parts of the economy rather than the improving parts.
ReplyDelete2. Nominal income has grown fasted due to the advances in various areas such as technology, education, labor, and more trade. These have caused the production possibilities curve to go outward, expressing the improvements in the these various areas.
3. Prices have become less expensive in Fairfax County, for it is one of the richest counties in America. Due to it’s large incomes, prices have become higher, but due to the large amount of income, the prices are in fact, less expensive.
4. It has experienced little change, but they are obviously the ones that suffer from the increasing incomes. The middle class, working class, along with the poor suffer grealt for they are not receiving as much income as the wealthier families, and when prices rise in price they cost more for the working class. This is due to an increase in global competition, for this decreases wages. As a President and leader of this country, this would be one of the hardest issues to deal with. If I had to choose, I would advice the President to give more tax breaks to the middle class and increase the taxes a little bit on those who can afford it. Although this may appear unfair to those who have earned the higher wages, it appears to be the only solution to me to render the intended result.
5. The car riddle has to do with the higher incomes of society today in comparison with income back then. As prices have decreased in comparison with income, a car that was 7000 back then would be more expensive for your income, whereas a 20,000 dollar car would be less expensive in comparison to our inco
1. I actually started to believe the country was worse off, thanks to the media. It looks like they are dramatisizing everything to make it look bigger and badder so they can get more people to watch their channel.
ReplyDelete2.Nominal income has grown faster than nominal price thanks to increased productivity. (shift of PPC to right, due to education/ specialization, better technology, etc).
3. Its not that hard to observe that prices are relatively less in Fairfax when you see practically everyone walking around with a North Face jacket and a pair of uggs. Fairfax's prices are relatively lower than those in other counties because of higher income due to the amount of people with a higher education.
4. The real income of the middle class hasn't changed much over the past 15 years simply because as technology develops, further advancing production possibilities, the labor of middle class workers is not as valued or needed. Also, the services of people with higher education has always been valued more, and will be given higher paying jobs (competition). I would not simply recommend that people go to college, as that would be meaningless due to the rapidly rising price of higher education and the middle class's purchasing power stays about the same. I would attempt to lower the tuition and costs of higher education possibly through subsidization and increasing the number of federal loans.
5. Easy, the car was more "expensive" back then because your nominal income was much lower, when today it is comparively much higher. So, technically, that $20,000 is cheaper for you.
Wonder what kind of car it was....
1. Yes, I was convinced by the media that people are worse off now than they were 30-40 years ago. The news anchors always say Americans are going through a difficult time. The anchors use examples such as the rise in the prices of gas, food, and other various products.
ReplyDelete2. Nominal income has grown faster than nominal prices due to an increase in productivity. Technology, trade, and labor have become more efficient, which shifts the PPC to the right.
3. The prices of products in Fairfax County are relatively higher than other counties in America. Fairfax County is one of the wealthiest counties in America which would mean people in Fairfax would get more income than people in other counties.
4. The real income of the middle and working class has not changed much in the last 15 years. The reason why is because there has been an improvement in technology and global competition has increased. The real income of the upper-class has increased due to more education. If I were president I would encourage the working class to learn about the new technology.
5. Mr. Latter’s first car was $7,000. Now his car is $20,000. The price of his first car took up most of his income because incomes were not as much as they are today. Since then, his income has increased and now the $20,000 takes up a smaller fraction than his first car. This means the first car is more expensive.
1. Yes because the media makes it seem like the 70s and 80s were the "glory days" of america. While now we are a struggling economy as a whole. They only talked about the negatives and never the positives.
ReplyDelete2.Nominal income has grown faster than nominal prices due to increased productivity. This has happened because of an increase i technology, education, labor, and trade.
3. Fairfax counties have lower prices relative to other counties in the United States because the real income is much higher than most parts of the nation. This is because of the higher education fairfax county residents recieve.
4.The real income of the middle class in the past 15 years has barely changed because there is an increase in global competition and increased technological integration into companies which has decreased wages. I would integrate a new educational system and would abolish colleges and create mandatory from elementary past high school and then have a select major that one must study. This would be similar in the colonial days as one mastering a craft, or business. This would increase the competition for high salaries and higher and standard of living.
5.The car purchased right out of college was more expensive than today because real income has increased over the years making it easier to afford now than it did before even though their nominal price have increase also. Real income has increased more than nominal price making it cheaper.
1. Before reading this blog, I did have an impression created by the media that the average American was somehow worse off economically than 30 or 40 years ago. The media always makes it seem like America is going through a tough time with rising prices of gas, cars, homes, etc.
ReplyDelete2. Nominal income has grown faster than nominal prices because of an increase in our productivity.
3. Fairfax County has lower prices relative to other counties in the U.S. because the real income in Fairfax is very high compared to most other parts of the U.S. Also, there are many jobs in this area, and therefore many workers who benefit from the higher real income.
4. The purchasing power or real income of the working & middle class in America over the last 15 years has not changed much because global competition has increased. Also, there is better technology, so there is less of a need for human workers. If I was President I would give the middle class a reason to strive for higher education. I would subsidize universities for lowering their tuition. This would allow more people to go to college because it would be easier to afford.
5. When you purchased your car, the real income was much lower then than it is now. That being said, the car you purchased back then would be more expensive than one purchased today.
1. I think that that the media shows that the average American has it harder now because everywhere you go, all the prices are raising tremendously. My parents used to say that they could be an ice cream come from McDonald's for only a dime.
ReplyDelete2. The nominal income has grown faster than nominal prices simply because the improvement of techonlogy.
3. Fairfax County has relatively lower prices compared to the other counties in the United States because Fairfax County has a greater income than most of the other counties in the United States. Even though the prices in the shops are high, it is still not expensive for the people who are purchasing the items.
4. The purchasing power or real income of the working & middle class has not changed much over the last 15 years. It is mainly because of the increase of competition and the increase in technology. This shows that people with a greater education, tend to have more income when they are older.
5. Mr. Latter's first car, $7,000, was relatively more expensive than the cars we buy for $20,000 because the income of the average person has raised tremendously, therefore having product values raise too.
1. Yes, I did because the media often depicts our society as worse off than it actually is by quoting and filming the very poorest of people in our country who really do not represent the majority of people in the United States.
ReplyDelete2. Nominal income has grown faster than nominal prices because of an increase in productivity which includes improvements in technology, more education, more labor, and trade.
3. Prices in Fairfax County are relatively lower compared to other counties in the United States because it is in relation to the incomes of the citizens. Fairfax County is considerably more efficient than other counties; therefore, real income is very high. We use these higher incomes to buy more goods even if they are more expensive in other counties due to lower incomes.
4. The real income of the working/middle class has not significantly changed of the past 15 years due to increased global competition and the integration of technology in companies which can keep employee wages down. If I was president, I would enact policies that would provide more scholarships for higher education so that it could be more assessable to lower class citizens.
5. The $7,000 car was more “expensive” because your nominal income was much lower whereas today it is higher in comparison, making the $20,000 car “cheaper.”
Review Questions:
ReplyDelete1. Yes, media tries to sway their audience to believe that prices are much higher than they were 30 or 40 years ago. This is because, the actual price of an item is higher, media does not take in affect other contributors, such as income.
2. Nominal income has grown faster than nominal prices due to an increase in productivity. We have increased in better technology, education, labor, and trade which allows prices to drop in comparison to income.
3. I believe that in Fairfax County, product prices are relatively less expensive than the rest of the Unites States. Fairfax County is ranked one of the wealthiest in the United States; because of this people are receiving higher income. The Nominal prices in Fairfax County are higher than the rest of the United States, but that is because our income in comparison to prices is higher.
4. The purchasing power or real income of the working & middle class in America over the last 15 years has not changed much. This is because an increase in competition. An increase in competition causes for better and more efficient technology, education, labor, and trade, which leads to a standard of living better than before. If I became President, I would do my best to increase competition. My plan for achieving this is to lower tariffs to make it easier to trade with other countries.
5. The “car riddle” is explaining that when Mr. Latter bought his car for $7000, that is actually more expensive than buying a car today for $20,000. This is, once again, just the nominal price. The $20,000 car is less expensive than the $7000 car, because income prices have increased, therefore making the real price of the $7000 car higher.
1) Yes, because the media today loves to freak people out by saying we are much worse economically than we were 30 years ago. They say that gas prices, housing prices and the prices of general goods are rising at a fast pace, but they never mention that one's income is also rising.
ReplyDelete2) The nominal income has grown faster than the nominal prices because the productivity has increased due to improvements of technology, education and trade.
3) The prices in Fairfax County are relatively lower than those of the rest of the country because the nominal income of Fairfax County is one of the highest in the country. If the nominal income is higher, then the prices, if they are raising constant with your income, are virtually staying the same. The nominal incomes of some counties are much lower which results in higher prices of goods.
4) The purchasing power or real income of the working and middle class has not changed very much over the last fifteen years due to an increase in competition throughout the world. The main reason in which the higher class's income is rising is because they received a better education and can acquire better, higher-paying jobs. The improvement of technology has also taken the place of many jobs that humans used to perform. If I was the President, I would lower the tuition rates for colleges so that more people can attend. I would also change the testing system that colleges look at because many students aren't getting into the best schools, not because they are not bright enough, but because they are not good test takers.
5) Due to an increase in income over the last couple of decades, the price of a car today that looks to be expensive is the same, if not cheaper, than the price of a car back in the 70's that looked to be cheap. The income today is much higher which allows for us to buy more goods at higher prices.
1. I had a strong impression created by the media that the average American was somehow worse off economically than 30 or 40 years ago. The media provides its audience with misleading information. This information leads an audience to believe that society is severely struggling in today’s world. According to the media, product prices are always increasing. It is very rare for an individual to discover a decrease in the price of a product.
ReplyDelete2. Nominal income has been growing faster than nominal prices as a result of increasing productivity. Increasing productivity includes advances in technology, education, labor and trade.
3. Fairfax County is one of the wealthiest counties in America. Therefore, prices in Fairfax County are relatively lower when compared to prices in other countries. These lower prices are a direct result of our higher incomes. Higher incomes provide individuals with the ability to purchase these high-priced products. In comparison, other counties do not receive high real incomes like Fairfax County. Therefore, the price of products in these counties will be relatively higher than the product prices in Fairfax County.
4. In America, the purchasing power of real income of the working and middle class has experienced an insignificant amount of change over the last 15 years. However, the changes are mainly a result of the increase in global competition, as well as the increase in technology. These increases in technology and competition have contributed to the overall leveling out in their standard of living.
5. During the time when you purchased your first car, the real income was much lower than it is today. Therefore, the $7,000 car purchased then is considered to be more expensive than a $20,000 car purchased in today’s world. Since this point in time, the real income has gradually increased, making products less expensive. Today, cars purchased for $20,000 appear less expensive because of the higher incomes that exists within today’s society.
1. Yes, I had an strong impression created by the media that the average American was somehow worse off economically than 30 or 40 years ago because many historical texts described many negative aspects of that society such as unskilled workers and many uneducated people.
ReplyDelete2. According to the article, nominal income grown faster than nominal price because average because American enjoys greater access to more and better goods and services than ever before, including improvement in technology and education.
3. Prices in Fairfax county are relatively lower than other counties in the United States, because it is related to its income. Fairfax Country which is one of the richest country in USA, make people in this county to be able to afford the high prices.
4. The purchasing power or real income of the working & middle class in America over the last 15years has not changed much because of today’s competitive society. According to course of human experience, the real income of upper class with higher education is increasing. Therefore, nowadays, education plays significant role in earning more money.
5. The car with &7000 is more expensive than the car of &20000 because your real income was lower when you just graduated from college. &20000 is cheaper because your real income has increased much even though the nominal price also increased.
1.) Before reading this blog, based on media reports and people’s recollections of the time, I did have the impression that the average American was worse off economically now than the average American was 30 or 40 years ago. My impression was that, thirty or forty years ago, the average American could afford to buy a house and a car, and that it was not uncommon for households to function on one income. Today, things look different. Many people are not able to afford to buy a home, most people cannot afford to buy the cars they drive outright, and dual-income households seem to be the norm. Young people come home to live with their parents after they finish college, because they cannot afford to live on their own.
ReplyDelete2.) Nominal income has grown faster than nominal prices because our productivity has increased. Our productivity includes more efficient technology, an increase in education, more labor, and international trade. Because we are producing more products and services than we did earlier, prices have fallen relative to income.
3.) The prices relative to income are less expensive in Fairfax County than the rest of the United States. The reason it is lower is because the median household income of Fairfax is much higher than most of the United States, which makes it possible for us to afford the higher standard of living.
4.) The purchasing power of the working and middle class in America has stayed about the same over the last 15 years. The leveling out in their standard of living is due to increased global competition and increased technology integration into companies. If I were President I would try to make higher education more accessible to the working and middle class, so that they would have a greater opportunity to raise their standard of living.
5.) You’re first new car you bought for $7,000 was “more expensive” than the first new car I am going to buy for $20,000 because you’re nominal income was lower than our nominal income will be. The $20,000 car will cost us less of our nominal income than the $7,000 dollar cost you at the time that you bought it.
1. Yes I was influenced by the media that our economy was the worst it has been in 30 or 40 years. I did not know that in fact our nation’s economy is the best it has been in 30 or 40 years. They make it look like we are on the verge of going bankrupt rather than being able to afford more and better goods and services.
ReplyDelete2. Nominal income has grown faster than nominal prices because our production of goods has improved faster. Our advancements in technology and our global competition has increased.
3. The prices are higher in Fairfax County compared to much of the United States but relative to our real income our prices our lower. Fairfax County residents make more money compared to the rest of the nation so our prices or lower.
4. The purchasing power and real income of the working and middle class has leveled off because they are getting less work because they have less uses. With the advancements in our technology we have areas where it is cheaper to have a machine do something instead of a human. This is why education and skills are more important than manual labor. As president I would encourage companies to keep jobs in the US instead of outsourcing to other nations.
5. The answer to the car riddle is that our real income has increased since the $7,000 car was sold. This makes our ablity to buy more goods and services easier and we can buy a $20,000 car and it will be relatively cheaper than what is was years ago.
1. Yes, I did because the media always portrays our society as worse off now than 30 or 40 years ago because the prices for the same products are greater now.
ReplyDelete2. Nominal income has grown faster than nominal prices because of increased productivity. This has happened through improvements in technology, more labor, more education, and trade.
3. In Fairfax County prices are relatively less expensive than the rest of the United States. This has to deal with the level income of the people in Fairfax. The prices are higher but since the peoples income's are higher things are less expensive for them to purchase.
4. The real income of the working and middle class in America over the last 15 years has not changed much because of the increase in global competition and an increased technology integration into companies. This tends to keep the wages of the middle class down. If I were President I would recommend that the working class work for a better education but I would also try and help them by lowering tuition costs.
5. Mr. Latter's first car cost $7,000 and was more expensive because his real income was lower. The car that college students are going to buy to day for $20,000 is less expensive because real incomes are higher today.
1) Yes, I had that impression. I feel as though that the Media states a lot of negatives and depicts a lot of situations worse than they actually are. I not only hear a lot of concern from the media, but also from my parents, talking about how movie tickets were something like 25 cents, now they are 12 dollars.
ReplyDelete2) Nominal income has increased based on; a more efficient technology, better education , and labor and trade
3) In Fairfax County prices are relative to income have caused Fairfax City to be one of the cheapest areas in the United States, the real income is high so Fairfax county can afford high prices.
4) The Purchasing power of the middle class in America over 15 years has remained the same for the most part. Technology has played a huge part in the leveling of the standard of living. If I was president I don’t have any recommendations on policies or actions.
5) The car riddle, correlates with question #1. It may have been 7000 back then but it is extremely expensive prices may seem like a lot but it’s relative to the type of income we have. The interesting thing, is if you were to take a car from back then that was 7000 dollars and it was in perfect condition, and sold it today, you would get the same price for it as you would with a brand new car in this century. the car maybe somewhere between $20,000-30,000 which is interesting because it relative income.
Review Questions:
ReplyDelete1. Yes, the media is constantly misleading us stating that Americans are worse off economically than 30-40 years ago. Between gas prices, the price of houses and cars, we are lead to believe that we have less when in reality we have more than ever before.
2. Nominal income has grown faster than nominal prices because of increase productivity due to technology.
3. I think that prices of products have relatively become less expensive. This is because people in Fairfax County have incomes that are increasing faster than the price of products. Our nominal income is greatly higher than that of the nominal prices.
4. The purchasing power or real incomes of the working and middle class have relatively stayed the same over the last 15 years. This is due to competition that increases peoples desire to do better. Competition causes Americans to go further in their education, and always try to do better than they could before. This has causes Americans to receive better and higher paying jobs which inturn raise our standard of living.
5.Because of inflation and nominal income increasing faster, Mr. Latter’s $7,000 car is relatively more expensive than a $20,000 dollar car would be today. Back then; his income compared to our income today would have been less, thus making the car more expensive.
1. Yes, before reading this article, today’s media gave me an impression that the average American was worse off economically than 30 or 40 years ago. I think this impression was caused because today’s news providers tend to dwell on the negative. In the recent years, we have been fighting a recession as well as increasing prices in good such as gas and property. Therefore, it seemed logical to think that we were bad off economically.
ReplyDelete2. Nominal income has grown faster than nominal price due to increased productivity. Productivity and essentially the production possibilities curve have been increased through technology, education, labor, and trade.
3. In Fairfax County, prices relative to income have caused prices to be relatively less expensive than the rest of the United States. The cheaper prices are due to the fact that Fairfax County is one of the richest counties in the country. The incomes of the residents of Fairfax County are high meaning that have a greater purchasing power.
4. Over the last 15 years, the purchasing power of the working and middle class in American has remained about the same. This leveling out in their standard of living was caused by increased global competition and increased technology integration into companies, which leads to low wages. Therefore, middle class workers are not needed as much. If I were President, I would create stricter rules about education, especially making it mandatory to attend college. Attending college and receiving a higher education increases your chance for receiving a higher income. This would increase competition and help the middle class become high class workers.
5. The “car riddle” in the last paragraph of the blog is a perfect example of how product prices are cheaper than ever before. Although the nominal price of Mr. Latter’s car was cheaper than the nominal price of the car today, our nominal income will most likely be greater than what his was after he graduated from college. This means that our real income is higher, which increases our purchasing power. Therefore, goods are relatively cheaper to us.
1)Throughout this article I had the exact impression that the media was trying to express that Americans were worse off 30-40 years ago. Americans are dwelling because our economy is acting far below what is expected of a nation with this many resources and is failing to completely fulfill all of our wants. Because of this, we feel that our economy is failing.
ReplyDelete2)Nominal income has grown faster than nominal price due to increased productivity. Our production possibility has shifted to the right as a result of improvements in labor, capital, and land resources.
3)I believe that prices of product in Fairfax are far less expensive than in other areas of the United States. this is because Fairfax is more of a wealthier city and consumers have a high enough income to purchase goods and keep prices from inflating.
4)For the past 15 years, the purchasing power has stayed relatively the same.Technology and competition have really helped to level out the standards of living. If I were president I would recommend workers to improve their education so they are more "valuable" to the workforce and can act to improve our working class.
5)The "car riddle" is used to show how inflation and nominal income are increasing. This has caused Mr. Latter's $7,000 car to be relatively more expensive than a $20,000 dollar car would be today. This is caused because of our increases in incomes that reduce the effectiveness of a dollar now, as compared to a dollar in the Civil War times.
1. Yes I did have an impression based on the media. The media had made it seem that the average American is much worse off in the present time then they were 30-40 years ago. This is most likely because the media tends to dwell on the negative side of things when they deliver their broadcasts.
ReplyDelete2. Nominal income has increased faster than nominal price due to an increase in productivity. This has mainly occurred due to improved labor, capital, and land resources.
3. Fairfax County is regarded as one of the most wealthy counties in the nation. As a result of this, the prices are much less expensive then most areas of the country because they are relative to our income. Fairfax County residents have a higher income, so we can purchase these products.
4. The working class purchasing power has remained quite similar over the past 15 years. The working class american has become less of a necessity however because of the integration of new technologies and much more competition. If I were the president, I would encourage that more people seek higher education so that they might be able to compete more for jobs and cause people to work harder.
5. The car riddle is just illustrating that price and income are directly related. The $7,000 dollar car that Mr. Latter purchased is much more expensive when compared to his income at the time then $20,000 will be when compared to ours. This illustrates the relaionship between price and income.
1. Yes, prior to reading this article the media had clearly given me the impression that despite obvious advances in technology and business the average American was much worse off today than in decades past.
ReplyDelete2. We know that nominal income has grown faster than nominal prices because of the amount and quality of the goods we enjoy today relative to times past. Increases in technology and productivity have translated to more goods and services being available to the highly educated or trained.
3. In Fairfax County, prices relative to income have decreased dramatically. This explains facts like the average Fairfax car being a BMW and the average house being a virtual mansion. If prices had increased relative to wage then residents would not be able to own four cars and three computers.
4. The real income of the working middle class over the last fifteen years has remained relatively the same. This leveling out in real income, versus the upper class, results from increased globalization and integration of technology into companies. As president I would take policy actions to expand education and training to the working middle class. Hopefully, this would help them realize the shift in the American economy from manufacturing towards more skilled professions, consulting, and technology.
5. The riddle simply means that even though we will be paying more for our first car in actuality it will be proportionally less because of our much larger income.
1. Yes. I had an impression that the average American was somehow worse off economically than 30 or 40 years ago because the media, which is very closely associated with out lives, has reported a lot of negative news such as that gas and food prices are increasing and that deals with unemployment.
ReplyDelete2. Nominal income has grown faster than nominal prices due to productivity. With an improvement of technology and education and increase in labor and trade, more products and services are produced and anytime there is more of something the price falls relative to income.
3.In Fairfax County, prices relative to income have caused product prices to be relatively more or less expensive than the rest of the United States because Fairfax County is more well educated and efficient. Therefore, people living in Fairfax County have better jobs that offer higher income, and as a result of higher income, people are able to afford expensive goods.
4. Purchasing power and real income of the working and middle class in America have not changed that much over the last 15 years because most of people in that class are less educated and skilled, which results in less competition among those people. If I were president of the United States, I would make college education mandatory so that everyone has some basic skills needed in the country to succeed.
5. Mr. Latter's first car that he bought for $7,000 is more expensive than today's $20,000 car because average income of today is higher than what it was before. Therefore, $7,000 car might have been very expensive at that time when Mr. Latter got our from his college because an income of most of people were low.
1.)Prior to reading this blog I felt that things are currently a great deal more expensive now than ever before. This came about from hearing about this through the media and people from older generations.
ReplyDelete2.)Nominal income has grown faster than nominal prices due to an increase in productivity that came about through more trading, better technology, and better education.
3.)In Fairfax County relative income has caused prices to be relatively less expensive than the United States because the prices can not catch up to the rising incomes.
4.)The purchasing power of the middle and working class has stayed about the same over the last 15 years. This has been caused by more global competition and increased technology which reduces some of the need for employees. If I were president I would do more to expand trade in order to help the middle class.
5.)The relative cost of your car that you bought in college was much greater than a new car considering your financial situation and the relative incomes at that time.