Chapter 1

1. What in this chapter made you think about an economic concept differently than your previous beliefs?  
2. What new questions do you have now about the US economy based on this chapter?

After reading chapter 1, the first concept that struck a practical note was that of principle number 3 - rational people thinking at the margin.  It occurred to me that a few years ago during a job interview I was responding to a question from the interviewer without even realizing that it had to do with economics.  She asked about my strengths and I mentioned that I thought time-management skills were at the top of my list.  Of course she asked me to elaborate and I said making marginal decisions is what allowed me to accomplish all of my tasks.  First, identifying everything that had to be done, then determining from those, which had to take priority over the others.  I suppose this could be classified as common sense when faced with multiple responsibilities, but then I began to consider all the other aspects in life where marginal decisions are made as well.  As a mother, full-time employee, student, friend, wife, etc.. it is very easy to come up with examples of how I manage my time and balance life.
The other concept that made me think differently was that of how people respond to incentives.  Prior to reading this chapter I would have simply said that people work hard/harder when they are rewarded for that work.  What I found interesting though, was that based on certain incentives people's behavior changes according to some indirect effects.  It was, as the text explains, these less obvious indirect effects that are the cause.  It made me think about how incentives not only can increase productivity, but also present a potentially negative side effect if the result is something that is taken for granted, exemplified by the text's example of seat belt laws.  Incentives to me have always been something straightforwardly positive; never something to consider as a negative, but that is where another economic concept comes into play: trade-offs.  I can know see where it is in society's better interest to consider the role of incentives when it comes to policy making.

One question I have so far from chapter 1 is why governments increase the quantity of money?  I understand that it is the reason for inflation, but I didn't quite feel like there was an explanation as to why that is ever the case.  Part of principle 10 states that " increasing the amount of money in the economy stimulates the overall level of spending and thus the demand for goods and services."  If people only earn what they earn, how does the increase in money stimulate spending?  Does this have to do with the stimulus package Obama provided a few years ago?