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.