Chapter 35

Chapter 35 revisits the unemployment and inflation topic and tries to go more in depth. There is a short run tradeoff between unemployment and inflation. The Phillips curve represents this trade off in a graph of unemployment and inflation which slopes downward. It shows how inflation and unemployment change in response to changes in aggregate demand and aggregate supply. The long run Phillips curve is completely inelastic and vertical. It is affected by the natural rate of unemployment and instead demonstrates monetary neutrality. This chapter goes really in depth and again utilizes two graphs at once making it more difficult to grasp, so I would give this chapter a 2 out of 3.

Chapter 34

Chapter 34 is similar to chapter 33 in that both go in depth on short run fluctuations in the economy. This chapter looks at the reasons why the aggregate demand curve is sloped downward. The most important reason it slopes downward is because of the interest rate effect. This says that since the price level is lower less people want to hold money on them and therefore they will want to lend it. This causes the interest rate to go down. So far this chapter is not too hard to understand. I give it a 1.5 out of 3.

Chapter 33

Chapter 33 focuses on aggregate supply and aggregate demand. The chapter dials in on a lot of short term fluctuations which is really something new in our class since so far we have only talked about things in the long term. There are many things that influence aggregate supply and demand.  Somethings even being unpredictable. These influences can shift the curves and the shifts are what affect the GDP. I give this chapter a 2.5 out of 3. There is a lot of information that is very dense so i hope we spend longer than usual going over all of this like we did the last chapter.

Chapter 32

Chapter 32 goes in depth on the open market trade and how it is affected by government policies. This chapter brings together many of the concept we have previously looked over in Macroeconomics. To understand open market trading we must understand the markets that make up saving, the market for loanable funds and the market for foreign currency exchange.  Basically the market for loanable funds is used to find the net capitol outflow and that is used to find the supply of dollars in the market for foreign currency exchange. Government intervention causes these curves to shift left or right which cause an effect for the other market.I give this chapter a 2 out of 3. Even though we have previously covered these topics I am still a little confused in how the market for currency exchange works and how it moves.

Chapter 31

This chapter talks about open economy macroeconomics. We have already learned a lot about closed economics, but in open economics there is international trade where different economies interact with each other. One of the ten principles of economics is that trade makes everyone better off. Economies interact by buying and selling goods and services in world markets and buy buying and selling capitol assets in world financial markets. Net exports, a part of GDP, is calculated by subtracting imports from exports. A positive number means more exports than imports and a negative number means vice versa. If it is a negative number that is called a trade deficit.There are Many factors that influence exports and imports such as the tastes of consumers, prices of the goods, government policies, and incomes of consumers. The purchase of domestic assets by foreigners subtracted from the purchase of foreign assets by domestic residents equals the net capitol outflow. If NCO is positive, the domestic residents buy more foreign goods than foreigners are buying domestic goods so capital is flowing out of their country. If NCO is negative, domestic residents buy less foreign goods than foreigners buy domestic goods so capital flows into the country. I'd give this chapter a 1 out of 3. The new topic was pretty easy to understand since it's just the amount we import vs. export.

Chapter 30

Chapter 30 talks about inflation. Inflation is when  price levels increase due to a new influx of currency. The item still holds the same value, but now the value of the currency goes down because there is more of that currency. Since the value of the currency is now lower it takes more to buy something of  a certain value. The people still hold the same demand for things, it's juts the value of the money that changes. In the U.S inflation is pretty common, using CPI and GDP economists have calculated that over the past 70 years prices have inflated 4% annually. The opposite of inflation is called deflation, which is where price levels lower. An extreme case of inflation is called Hyperinflation in which there is an extraordinarily high rate of inflation. For example in 2008 in Zimbabwe the inflation rate was 24,000 percent. I'd give this chapter a 2 out of 3. There really going more in depth on inflation and that leads to some complications.

Chapter 29

Chapter 29 really goes in depth on the meaning of money, because really these wrinkly pieces of paper don't have real intrinsic value. It's value is from the government setting it as the national currency. This is called fiat money. By using money we are better able to allocate our resources,  otherwise we would have to barter for something of immediate value instead of trusting the object we are getting can be traded later for something of value. Money has three functions. It is a medium of exchange, meaning it can be traded for things of value. It is a unit of account, meaning it is used to place a value on things being sold. And lastly it is a store of value, meaning its purchasing power can be transferred from the present to the future. I'd give this chapter a 1 out of 3 so far. There is a lot of new information, but it is pretty easy to understand.

Chapter 28

Chapter 28 goes in depth on labor in America. The adult population is split up into three separate groups. The employed, unemployed, and not in the labor force. The employed and unemployed are part of the labor force together. It's a little strange to imagine the unemployed as part of the labor force, but then the book  points out that the unemployed are still making an effort to become employed so you can't count them out just yet. The people who are not part of the labor force are adults such as full time students or retirees who do not work. The Bureau of Labor Statistics is what quantifies all of these groups and uses those numbers to create statistics. In the complex U.S. economy there will always be unemployment and this is called the natural rate of unemployment. The deviation from this natural rate is called cyclical unemployment. I give this chapter a 1.5/3 so far its not too hard to understand the concept of the labor force and unemployment.

Chapter 27

Chapter 27 talks about the field of finance. It is about the choices people make for allocation of their resources and their risks over time. People tend to avoid risks by buying insurance making sure to diversify their stocks and investments. This does help avoid risk, but does not eliminate all risk since the economy is fickle and uncertain. A person could spend a while trying to find out which stocks to invest in or choose at random and the outcome will most likely be the same. The stock market shows all the information of a stock through its value. If the company does well and starts to gain more profit through expansion or a new innovation then the value and price of the stock will go up. The opposite can happen to, a company can start to do worse and the stock value and price will fall. However there is not real way to predict the rise and fall of stock prices because anything can happen. A company could create a new highly popular product that will skyrocket the stock price, but then a week later the product can end up having a huge defect causing recalls and the stock price will plummet.
I give this chapter a 1.5 out of 3. The chapter was fairly short, but I'm still a little confused on the new topics.

Chapter 26

Chapter 26 was a confusing chapter with a lot of new info. The chapter talks about financial markets which allow money to move from savers to borrowers. this movement is done through, bonds, stocks, banks, and mutual funds. If an economy is closed then savings are an investment for the whole economy. The interest rate is dependent on the savings and investment. Savings are the supply and investments are the demand. To see how policies affect interest rates you most also take into consideration the supply and demand of loanable funds. A government budget deficit represents negative public saving which reduces national saving and the supply of loanable funds available to financial investment. This reduces the growth of GDP. War leads to higher taxes but not enough to pay for the war so it results in a budget deficit and increase in government debt. I give this chapter a 2/3. There was a lot of new info and it took a while to get a feel for the chapter.

Chapter 24

Chapter 24 talks about the cost of living. The cost of living sounds exactly like what it is. It is the amount of money needed to pay for things for a normal life. However this is hard to measure since prices are constantly changing and the value of currency is changing due to inflation. To track the change of prices and inflation the consumer price index is used. The consumer price index compares the prices of things called baskets from year to year. Baskets are fixed prices that represent what goods and services the consumer values as most important. Comparing the baskets allows for a consumer price index to be found each year. Then the years can be compared to find the inflation rate for each year. However the CPI is not perfect for measuring the cost of living. It does not take into account that a higher price will not mean the consumer will pay more, they will just find a cheaper substitute. Also it does not reflect the introduction of new goods and services into the market. I give this chapter a 2/3. I understand the first part of the chapter and how the CPI works, but i start to get more confused further in the chapter like how the CPI does not reflect the introduction of new goods and services.

Chapter 23

Chapter 23 is a macroeconomics chapter. Macroeconomics talks about the economy as a whole and not just one specific firm, market or household. Before we have only seen how specific firms have made their decisions, but  now we will see economic changes that affect all the firms, households, and markets together. This chapter introduces GDP which stands for gross domestic product. GDP is the total income or expenditure of the entire nation. It can be either income or expenditure because in any situation where there money changes places there is a buyer and a seller. So the income of the buyer is the same as the expenditure of the seller. GDP is used to judge the welfare of the economy since it shows the standard of living for people in a way. The higher the GDP the more money there is, so the higher the standard of living. I give this chapter a 1 out of 3. This chapter only introduced one aspect of economics, GDP, and explained it well so it was not too hard to understand.