Questions On Common Sense Economics

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Common Sense Economics provides an excellent introduction to the study of economics, and particularly its many key principles, including the “twelve key elements,” “seven major sources of economic progress” and “twelve key elements of practical personal finance.” The most compelling section of the text deals with financial insecurity and its dependence on quickly escalating personal debts. Indeed, Gwartney et al. note that the ratio of household debt to disposable personal income reached 135% in 2007, “a two-fold increase since the mid-1980’s” (Gwartney 109). Moreover, prior to the recession consumer debt payments on consumer debt as a percentage of income spiked sharply (109). Thus, it appears that the 2007 recession was driven by high household debt. Moreover, the International Monetary Fund (IMF) has downplayed the role of public debt in driving economies to the brink. Instead, it warns that household debt is a much more volatile driver of economic recession. Therefore, the economic theme of rising household debts will be the concern of this analysis, which will borrow from the work of Mian and Sufi in House of Debt. The question of household debt has long been a contentious and divisive subject. Indeed, prescribing solutions to rising household debt and consequent economic recession is unlikely to be as controversial as actually diagnosing the problem. Indeed, household debt has long been censured and stigmatized from both moral and religious perspectives
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