Happy Holiday Break

I hope everyone has a great break and I wish you a happy safe time with family. See you when you come back on January 3. Don't miss me too much!!!

Tips for test

Follow the American Dollar

Ceteris Paribus

Opposite curves, same direction

Comparative Advantage is about the least opportunity cost, not what you do the best

Got any others?

Please Study for the Exam Tomorrow 12/7

"A Date the shall live in infamy." - FDR


International Trade Test

Items on the exam open for free response

Balance of Payments
Comparative Advantage
FOREX

Puke questions

Tariffs
Fixed or floating currencies
NTBs
General international trade questions

Behavioral Economics

Post thoughts below

Rational Expectations School

Post thoughts below

NeoClassical - Supply side

Post thoughts below

Monetarist Reaction

Post thought below

Monetary Policy School

Post thoughts below

Keynesian Response

Post thoughts below

Classical Backers?

Post thoughts below?

Schools of Economic Thought

Classical
Keynesian
Monetary Policy
Monetarism
Neo Classical - Supply Side
Rational Expectation School
Behavioral Economics

The Laffer Curve

Here is the extremely controversal model designed to lower taxes in an effort to support massive tax cuts while increasing spending brought into popularity by the Regan Administration. It provided the "proof" of the gains of trickle down economics.

Supply Side Economics

Today we will be watching a Frontline video call 10,000,000,000 and counting. This video links with our view point on Supply side economics or neo classical views. The expanding deficits are a result of the massive spending created by both Republicans and Democrats in the Keynesian expansionary movements while encouraging the shrinking the size of government in the US. This video travels through the Bush 41, Clinton, Bush and Obama Administrations and the growing debt.

Ooops, meant to post this about multiple deposit expansion

<{[Deposit - (rr%*Deposit)] * 1/rr%} + $ of OMO>


Any questions?

Please know what part correlates to Max change in money supply, max change in Loans in banking system, initial change in excess reserves and the Reserve Ratio

Test Tomorrow

Any last second questions?

Topics to be included but not limited to:

Monetary Policy
Fiscal Policy
Multiple Deposit Expansion
Bonds
Money Market
OMO
Discount Rate
Fed Funds Rate
RR
The Federal Reserve System
Multipliers
Loanable Funds
Crowding in and out effects
Counter cyclical policies


Did I miss something?

See graph below . . . . .

I don't want to undersell this but I must be the best teacher of all time. Completely generated the graph below, on my own, and found a way to upload it into the blog. I am awesome. True story. One time I tried to not be awesome. It didn't work. I was just as awesome as ever. Another true story.


Sometimes it hurts being this awesome. I had to see the doctor. Diagnosis????? . . . . . . . . bad case of awesome. No cure. Everyday is a struggle trying to be average, so I just end up being more awesome.

You're welcome.

Money Market Graph

Monetary Policy

The number 1 job of the Federal Reserve is to target the growth of the money supply but manipulating interest rates through Open Market Operations. The FED would prefer to stop inflation in contractionary monetary policy (or Tight Money Policy) by raising interest rates through the sale of bonds. Also at the disposal of monetary policy is the ability to buy bonds back from the public thereby creating an increase in the money supply causing inflationary pressure through an expansionary Monetary Policy. The manipulation of the Fed Funds Rate through the FOMC buying and selling bonds is modeled on the Money Market Graph. The FED does not set the rate but influences it by setting targets through OMO.

Other tools of Monetary Policy is the Reserve Ratio and the Discount Rate (referred to in your text as the "Window of Last Resort") but are rarely used. The discount rate is in current practice no longer a "Window of Last Resort" due to the FED attempting to create monetary stability due to the Economic Crisis in Financial Markets in 2008. However, College Board would still prefer that you note that the discount rate and reserve ratio are not significant tools of the FED.

The FED has expanded the tools of Monetary Policy in the last two years but these are not relevant for our coursework as of this moment in time.

Test Day Today

Classical vs. Keynesian
Loanable Funds
Investment Demand Curve
Consumption Function
Savings Function
C-S Link
Philips Curve
Aggregate Model
Determinates of Demand and Supply


These and other topics of interest examined today. See you then

Hedgefund Video

Remember that every media has bias and shown at the end of the video. That is not to say that the facts presented in the video are not true. I have not secured that information provided on the alternative websites mentioned in the video are authentic.

Here is the link for the second video as requested.


http://vimeo.com/3722293

Crisis of Credit Video

Tried to embed the video and it was a big fail. Here is the link. Thanks



www.vimeo.com/3261363

Today is test day

Best of Luck. Its been quiet out there. No questions or comments. Maybe I should offer extra credit to those who comment on this post? What do you think?

Test on Tuesday, Please Study

Topics to review:

GDP
-how to calculate
-whats included
-whats excluded
-what makes it different from GNP
-C+Ig+G+Xn

Unemployment
-definition
-when is it calculated
-employed vs. unemployed
-4 types of unemployment
-economic norms
-why do we use this as an indicator?

Inflation
-definition
-why is it an important indicator?
-3 types of inflation
-economic norm
-how is it calculated

CPI
-market basket
-its use
-what is included?
-how is it calculated?

Real vs Nominal GDP

Here are a few topics to review just to name a few. Please read your text concerning these topics and study. Thanks.

Creating a Price Index

First a base year must be established. For the United States we use the years of 1982-1984 as our base year giving it the Consumper Price Index number of 100. this is calculated by finding the price of a market basket in a given year, divide by the base year (in the case of the base year it would be the same number) and then adding 100. This creates your CPI for any given year.

Value of Market Basket in a Given Year / Value of Market Basket in the Base Year * 100 = CPI

Once you calculate the CPI, then you can find the price change.

Price Change = (Change in CPI / Begining CPI) * 100

In other words, to calculate the inflation percentage from any two years a simple formula to determine slope can be used.

(CPI year 2 - CPI year 1)/(CPI year 1) * 100 = Inflation percentage

After finding the CPI and Inflation percentage then you can use the CPI to convert Nominal GDP to Real GDP in order to compare different years GDP on an equivalent dollar (i.e. - adjusted for inflation) such as the value of a dollar in 1996 of goods sold in 1986.

(Nominal GDP/CPI)*100 = Real GDP

Hope this was a helpful reminder and refresher. Took me a while to type it so enjoy!!!!!

Unemployment and Inflation

Our discussion on these topics have been limited to understanding the genreal concepts which we will master before moving on to applying them to the aggregate model.

Unemployment concerns people who do not have a job and are actively looking for work. The types include frictional, seasonal, cyclical and structural. The economic norm the US targets is about 4-5% yearly inflation. With current economic climates, this number might not be attainable but it is still the standard. Currently the US hovers around 9-10%.

Inflation types include demand-pull, cost-push and hyperinflation due to political error. However it occurs, it is a result of a rapid increase in the money supply that may not generate new growth in the economy.

Can you list any examples in history of hyperinflation ruining an economy due to a government printing more money for deficit spending? Especially ones not mention in class.

Flaws of GDP?

What are the flaws of using GDP as an indicator of overall health of the economy?

Is there a better system?

Other Test Questions?

If you are dying to know the answer to any of the test questions please leave a comment and I will answer them below in that section for you. If you believe they deserve their own post, please note that and I will scan in the question and get after it. Thanks and hopefully you proved you have learned something so far. If not, no big deal. Just hope you break your leg. . . . . . Just kidding. . . . . . . . . Maybe. . . . . . . . . . . I don't know*.





*Coach is not responsible for broken legs. Do not sue as I have no money. That is all.

Answer to Free Response Question - FOREX

A) US Dollar ($) depreciates in comparison to the Euro (E) which appreciates in comparison to the US Dollar. Increased demand for Euros and an increase in the supply of the Dollar.

B) European products become more expensive to Americans so they will import less goods. The EEUs net exports will fall.

Answer to Free Response Question - Comparative Advantage

Ai) The opportunity cost is 1/5 unit of food.
Aii) The opportunity cost is 10 units of cloth.
Bi) Beeland has a CA in cloth.
Bii) Newland has a CA in food.
C) It doesn't matter the ratios are the same even if it quadruples. No difference.


Part C is designed to eat up time if you are not thinking clearly and could be the difference between a 4 and a 5. Sneaky jerks!

Welcome To AP Macroeconomics

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