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.