Chapter 33

Chapter 33 was focused on aggregate demand and supply, and explaining how they're different, as they take into consideration more factors and information that was not there before. The term "aggregate" means the the whole formed by different elements.  This is what "aggregate" is used for in this chapter.  Economists use these to study the short-term economic fluctuations.  One of the facts relating to economic fluctuation is that they are unpredictable and irregular.  It is near to impossible when they are going to happen.  It is like a business cycle and happens every so often.  Also, during these fluctuations, most macroeconomic variables fluctuate together in the same way.   In addition, a common fact, is that when the output falls, unemployment rise.  This makes sense since if there is less output, there is less workers and that means more unemployment.  The aggregate demand curve is made up of the goods and services that households, firms, the government, and customers abroad want to but at each price level. If the price is too high, then there is less demand so the curve is downward sloping.  The aggregate supply curve is made up of the quantity goods and services that firms would want to produce and sell at each price level.  If the price is high, then there will be more supply, causing the supply curve to be upward-sloping.  There are many reasons for the aggregate curve to shift such as changes in consumption.  As you may be able to tell, the reasons for shifts in the curves, are somewhat close to the shifts discussed in chapter 4.  In this case, they are just discussed in broader terms.

Chapter 32

Chapter 32 expands on how the market of loanable funds interacts with other variables in an open economy, such as with real interest rates and the amount of foreign currency available. When there's a change in one, the other variables will be noticeably affected by the change, along with net capital outflow and net exports. Three different graphs are used to explain key principles, being the market for loanable funds, net capital outflow, and the market for foreign-currency exchange. Deficits that happen in a government's budget causes the supply of funds to shift left, causing chain effects of a higher interest rate, less supply of foreign dollars, which causes real exchange rate to appreciate, which then causes imports to be more attractive to consumers than domestic goods, along with a lower net capital outflow due to the expensiveness of the exports compared to goods in other countries. There are multiple things that can happen to an economy, such as the budget deficit, to cause these chain reactions, and will have overall impacts in both the country's and world's economy. One important thing to take away from this is that no country is safe from capital flee, in which investors withdraw assets due to events or circumstances that may have happened.

Chapter 31

Chapter 31 focuses on the basic concepts in an open economy. Throughout the book we have just been focused on a closed economy to make situations easier. This chapter talks about how the country interacts with other economies around the world, introducing the vocabulary words export, import, and net export. The net export is determined by subtracting the value of the export by the value of the import. There is a trade surplus if that number is positive and if its negative then theirs a trade deficit. International trade has become so important in the us economy. The chapter shows a graph that shows that the US has imported more than it has exported, so that means it has a trade deficit. Then the chapter talks about net capital outflow and how it is the purchase of foreign assets by domestic residents subtracted by the purchase of domestic assets by foreigners. It then focuses on how the net capital outflow is equal to the net exports. Then it talks about how savings can be used either at home or to by assets abroad. So this means that savings equals domestic investment and net capital outflow. The rest of the chapter talks about the nominal exchange rate, which is the price between two currency's. If the dollar buys more foreign money when the rate changes then the dollar has appreciated. If the change is the opposite then the dollar has depreciated.The chapter also talks about the theory of purchasing power parity which states that different units of currency should be able to by the same quantity of goods.

Article Review 7

This article talks about Keynesian economics in general and his stance against it. Stockman has always had a huge dislike for Keynesian economics. He talks against Janet Yellen for taking an involved approach to the economy. Stockman says that the Keynesian trick of injecting the economy with money and credit will no longer work because the country has too much debt that it needs to pay off. He argues that low interest rates are super ineffective and that it really only helps wall street achieve their end goals. Zero percent interest does not help because the housing debt has gotten lower but it has caused the business debt to get higher. The article also talks about how negative interest rates are bad and that the central bank should stay way from them because the are a big detriment. An example is how negative interest rates have killed the European economy. Stockman talks about how Keynesain economists assume that Main Street (wall street) are dependent on government interference and that is really not the case. Overall he just continues to rant about this and keeps arguing against Janet Yellen.

Chapter 30

Chapter 30 focuses on talks about money growth and inflation. It discusses classical theory that was developed by early thinkers along with the quantity theory of money, which is a theory that states that the quantity of money available determines the price level and that the growth rate in that quantity of money determines the inflation rate. The chapter also shows the supply and demand for money and that the money supply is fixed because of the federal reserve, making it a vertical line on the graph. The demand is a downward decreasing curve, showing that when there is too much supply then the demand for money and the value of it goes down. Also the price level increases when this happens. Then the chapter talks about classical dichotomy which is the separation of nominal and real variables. A nominal variable is a variable measured in monetary units, while a real variable is a variable measured in physical units. Then it talks about how changes in money supply don't affect the real variables. The chapter also talks about the velocity of money and how it is the rate in which money changes hands. It can be calculated by multiplying the price level and the quantity of output, and then dividing by the quantity of money. The rest of the chapter talks about the inflation tax, the fisher effect, and the shoeleather and menu cost.Then it finishes of with a freesilver debate that includes the wizard of oz.

Chapter 29

The main focus of chapter 29 is the monetary system, in which the chapter explains how money is made and used by governments, while discussing the different types of systems that might be in place if a common medium was made, talking about the bartering system and its inefficiency based on what two people are looking for in particular times. It describes what money actually is, along with the different types of money that is available to use based on how the country's economy is, either being fiat money or commodity money. Money is the economy’s most liquid asset available. Commodity money is when money is when money takes the form of a commodity with intrinsic value. Intrinsic value means the item would have value even if it were not used as money, such as gold for example. Fiat money is money without intrinsic value that is used as money because of government decree. Paper dollars fall into this category because they are backed by the government. The money stock is the quantity of money circulating in the economy. Currency is the paper bills and coins in the hands of the public. Demand deposits are balances in the bank that depositors can access on demand by writing a check. The Fed is the central bank of the U.S and is designed to regulate the quantity of money in the economy and oversee banking.

Article review 7

This article talks about how the unemployment rate is larger than what it actually is being displayed. The reason is that there has been a decrease of Labor force participation rate over the last few years. Due to the difficulty of finding a job, it is much harder for people looking for one. It talks about how the creation numbers for March were very disappointing, with only about 126000 jobs having been created, being half of what was predicted.  The number might get revised but the participation rate will not. A reversal would only change if there were better economic opportunities and incentives. An example of the declining participation rate is that in 2006 it was around 66.2 percent but last year it was only 62.9 percent. This is around an 8.2 million difference. One story for this decline is that many bay boomers are retiring. But there is a higher percentage rate of workers over 65 years in the labor force last year. The biggest problem has to focus on people between the ages of 25 and 54 years. These people have finished school and are not retired yet, so they have a lot of use in the economy still. It has been shown that the men and women labor force participation rate has decreased. Staying at home has become more advantageous. A solution that is proposed  is to more welfare benefits back to the states. They would be able to better regulate the rules and adapt it for the geographic circumstances.

Chapter 28

The focus of chapter 28 was mainly on unemployment and what kind of role it plays in the economy, detailing how the statistic is calculated along with how the economy is affected by it. For unemployment to be calculated, people either have to be employed or unemployed, with the definition of unemployed being something else than what a person might first think. It takes into account whether the person has worked before and is looking for a job, and how long it has been since the person had a job. People that have had no employment are not taken into account, skewing the statistic by saying there are less people unemployed than there should be by not taking into account certain groups of people, like college graduates looking for jobs but never having one before. Due to how the economy is, there are always some people unemployed, as both frictional and structural unemployment play roles in it and affect how many are unemployed. Frictional depends on the person as workers take time to search for jobs, while structural is because some labor markets don't have enough for everyone looking for a job. Unemployment rate ends up being an imperfect measure of joblessness mainly because of how some people might respond to government surveys, along with how it is calculated.

Chapter 27

Chapter 27 went more in depth into things discussed about in chapter 26. It also introduced new concepts and ideas, such as how to measure value of money and being able to compare it to years in the future whether it's a good idea to take an immediate payment or through compounded interest over several years. Risk aversion was also introduced, with many factors taken into account when dealing with risky trade-offs. Having more wealth causes the risk to not be worth, as marginal utility of a risky bet would be much lower the more money a person has. This causes people to not be as risky as possible to be able to maximize the amount of satisfaction they get from their money without having to worry about losing it in a bet or something equally risky. With stocks, firm specific risk can be lowered by not putting all of a person's investment in one company so as to have multiple stocks in different firms lower risk as much as possible. After a certain point though, the risk involved reaches a plateau that can't go any lower, because while firm specific risk can be lowered, total risk can't after a while. And while many people want to lower the amount of risk they have, risky behavior can also have positive gains that can compensate for the gamble the person took.

Article Review 6

The author again talks mainly about how bad the economy is doing. This time, it's more focused on how the job market is doing compared to past years. It doesn't look too good based on the information presented, as the net gain in jobs in the past few years is much less than in 2000, and the turning point in the economy. He lets his emotions come through in his writing multiple times from what looks like frustration in the current state of the economy. He constantly blames Wall Street and people associated with them due to thinking they're the main problem with trying to fix the economy, mainly because of the agendas they have to limit the spread of bad news whenever possible to consumers to keep making as much money as they can before it blows over. The job gains in the economy are much smaller than before, with the smaller gains being significantly lower than from way before, with his angry accusations seeming to be, although emotionally driven, logically sound. He takes into account the different types of jobs that are being gained in the economy, noting that part time jobs don't really do much to help and would need more than double one of the jobs to compare with a 60k job.

Chapter 26

Chapter 26's focus was on saving and investment, with how entrepreneurs and home business people would start their business in terms of money. Usually, not many people have enough money to start it on their own, and require them to get money from outside sources. There are multiple ways the money can be gotten, as there is a giant financial system in place to help with the idea of helping start ups in the country. Along with the many ways to get money, there are also many ways to pay it back, either with loans and interest, having a share of the stocks of the company, or not paying the principle but instead having to pay a certain amount forever. There are also financial intermediaries that help with the process of borrowing and paying, with banks being one of the main ones. Banks are useful for small stores that would have a hard time trying to raise money through bonds and the stock market. Usually bonds and stocks are bought from more familiar companies that the consumer can feel safe buying from them. The idea also of national saving being equal to investment comes from the analysis of a closed economy that the info can be used for a variety of economies. A government budget deficit can lead to declining growth and productivity and the nation, meaning GDP will also fall with them.

Chapter 24

While chapter 23 measured GDP and income, chapter 24 focused more on the cost of living and the calculations that come with it. The consumer price index is one of the main things that helps measure the everyday costs for consumers based on certain factors, but can be a bit misleading at times due to the fact that certain factors that can change messes with it. Due to it being calculated with the conditions that the number of items stay the same, it is not realistic at times because of how consumers would react to an increase in price of one good while the other stays the same, giving the illusion that cost of living has gone up significantly even though there are other items that might be available to buy and use. It also doesn't take into account how the introduction of a new good can play a role in what the consumer will now buy after it has been introduced. GDP deflator and consumer price index are similar in what they measure, but differ due to one focusing on the goods made in the nation (GDP), and the other on the prices out on the market and the costs to consumers (CPI). Inflation has to be taken into account in order for both to be useful as the different values of money in different periods would cause confusion as to how CPI would help with anything.

Chapter 23

Chapter 23's focus was on GDP and how it's affected by many different things happening throughout the country of which it is being measured. It is a very big process that involves a large scale of every good and service (that is in the legal market) being sold and produced. It measures the net value of total spending and revenue the country produces, in which, ideally, the numbers would be the same, with number discrepancies being due to how it's calculated in two different ways, either from the spending or selling point of view. It is an intricate system that takes into account many things but sometimes excludes stuff to get the correct value of actual GDP, along with taking into account seasonal changes. For example, the used car market would not be taken into account for the car maker, as it has already been put out in the market and sold as is. The variety of households in a country and what they buy, how much they make, whether they have a company outsourced in a different country, all affect GDP in different ways (or no way at all as outsourced companies raise GDP of the country they're located in instead of the country the person is in/from). Spending on imports/exports is also a way that GDP is affected.