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Chapter 18 Reflection

After taking this course I can say I've grown more economically cognizant. Math and numbers have never been a strong suit for me, so participating in this course has helped me be more financially responsible and more aware of economic events such as inflation and unemployment. I believe I have changed my mindset of, "money isn't real so it doesn't matter." to a mindset that understands the importance of money and how it plays a part in every financial decision you make. The debate I found most interesting this chapter was "Should the Government Fight Recessions With Spending Hikes?". Although tax cuts are an effective way of increasing household, I believe increasing the money supply would be a stronger means of increasing the money supply in order to increase spending, and ultimately adding to aggregate demand and leveling the unemployment rate.

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Chapter 17 Reflection

After reading the article, “Yes, There Is a Trade-Off Between Inflation and Unemployment” by N. Gregory Mankiw, I’ve come to the conclusion that a short run trade-off between inflation and unemployment can be observed through the Phillips curve. The curve demonstrates the contrast relationship of the inflation rate compared to unemployment. I do believe there is a trade-off between them because when one rate rises the other rate descends. Although unstable, the Phillips curve helps economists understand the current conditions of the economy. In today’s standard our current inflation is 8.5%, which I believe corresponds to the low unemployment rate. 

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Chapter 15

I expect these changes to positively affect my economy local economy only in the short-run. I expect the short-run to last about 3-5 years before we see the a decrease shift again. I believe the SRAD and LRAD are interconnected by balancing each other out through the quantity of output and price levels.

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Chapter 16 Reflection

To begin, one of the first actions the Federal Reserve Board attempted in order to mitigate the economical effects of COVID-19 was issue a FOMC statement explaining that in order to bolster growth in the economy and labor market, the FRB had reduced the federal funds rate by 0 to 1/4%. This monetary policy allowed the cost of borrowing for households and business to decrease in order to support spending. An action the federal government took to reduce the economical impact of COVID-19 was direct lending to state and municipal governments. This fiscal policy allowed the state and municipal governments to borrow from the municipal bond market by loaning $500 billion towards governments that had investing revenues with maturities of less than three years. This action did not last as borrowing was halted by the end of 2020 after it lost support from the U.S. Treasury.

On December 21, 2020, a major spending bill was passed by congress as part of a COVID-Relief package. Approximately $2 trillion would be spent in order to support the economy. This bill was essential to many individuals who needed the stimulus for economic relief. Some of the risks that made the second multi-trillion dollar bill not go through in the U.S. included overspending after passing 4 bipartisan bills that totaled up to $3 trillion dollars. Had the bill passed on the other hand; many families, businesses, and state governments could have received the financial relief needed to combat COVID-19. Finally, the federal reserve has steadily reduced their expansion of the money supply in order to deal with inflation. I agree with this policy as it reduces the risk of the money supply shrinking.

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Chapter 13 Reflection

One of the first sections of the chapter that stood out to me was the FYI portion of the chapter. The reason I found this report interesting is because it introduced me to the importance for governments to have a national monetary policy. The report, named “The Euro”, explains how the adoption of the euro within the Europe had become a multi-faceted issue between countries who to kept their own currency and countries who adopted the euro.

The second moment in the chapter that I found beneficial is Figure 3 in page 275 of Chapter 13. The figure demonstrates how hyperinflation can occur when the quantity of money increased using an example of the money supply, the price level, and the nominal exchange rate in the German Central Bank. As the price level rose, the exchange rate fell. Additionally, once the bank stabilized the money supply, the exchange rate steadied as well.

Finally, I found the case study “The Hamburger Standard” interesting for the following reasons. First, it explains how using an economist perspective in everyday life can allow someone to approximate the exchange rates of a Big-Mac within several countries. Second, I found it really useful to see how purchasing power-parity can assist economists in making first approximations, but it isn’t the most precise form of estimating.

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Chapter 12 Reflection

The costs of inflation includes; the nominal interest rate, reduced interest due to 25% tax, after-tax nominal interest rate, and after-tax real interest rate. The real interest rate is directly affected by inflation, but economic problems could also arise from Deflation. Deflation poses a huge threat to the demand of goods and services, meaning employment and wages could be at risk of failing. In our present situation we are facing inflation. Lately it has made me more conscious of what services I'm buying and how much they're truly worth as prices continue to rise. As I become more financially responsible, I am sure I will navigate important economic decisions based on what I've learned about inflation costs.

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Chapter 11 Reflection

Cash is a currency accepted globally as a medium of exchange. It contributes to the money stock, although it isn't the only factor that contributes to the money stock. FRB relates to the Federal government by utilizing the reserve ratio. A bank system used for creating government regulations as well as banking policies. Recently the FRB purchased large amount of debt in treasury securities order to combat COVID-19, the method to do so is called Quantitive easing. The most recent change the FRB made to the money supply was approving a motion to increase their discount rate to 1/2 percent in Dallas and New York. The FRB spent most of the pandemic increasing the money supply in order to bolster growth in the money stock in the long run. After being exposed to the ins and outs of the money supply system in this country, I feel a bit more confident in making the right economic decisions during inflation.

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Chapter 10 Reflection

The unemployment rate will never reach zero because there will always be unemployed workers even when the economy is thriving.  Unemployment Insurance is a policy that increases the rate of unemployment. Although it assists unemployed workers, it increases unemployment because it provides an incentive to people. The Federal response bill was not an appropriate response to the COVID pandemic because it didn't provide any incentives for workers to find jobs after the bill had expired. For example, labor would have increased if an extra stipend was granted to people who have applied to jobs.

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Chapter 9 Reflection

Salary for a School Counselor with a bachelor's averages to about $60,000 a year. The salary without a degree averages to about $35,000, making $25,000 less than what was initially made. The average cost of a Bachelor's degree in Sustainability in colorado is around $10,000, this means I could receive a ROI of either $25,000 or $50,000 which are good investments for my major. The non-monetary aspects of my potential career could be fulfilling but it didn't change my results.

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Chapter 8 Reflection

Large budget deficits get in the way of the market for loanable funds because it affects those who save their supply fund as well as those who borrow demand funds. The loanable funds market selects different investment projects through supply and demand. Interest rates set the equilibrium level for the market for loanable funds, the model of market for loanable funds functions on the real interest rate after being corrected for inflation. ROI connects to interest rates by measuring the money used for an investment after the external rate borrowed from lenders. Lower ROI during recessions affects the demand for money because it greatly reduces investment gains compared to the cost. On the other hand, A higher ROI would increase investments compared to the cost.

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Chapter 7

The relationship between consumption and productivity is a concept that is synchronous to the growth of GDP. By subsidizing education and health the demand for these things increases. I believe the best way to use subsidy for activities is to alternate between the activities that have low demand in order to have a more balanced infrastructure. Although population growth boosts the labor force, it also increases the consumption of that labor and doesn't necessarily increase the standard of living. I believe the standard of living should be higher or at the same level of the workforce, in comparison to a strong workforce and low standard of living. Subsidizing parents could be a means of addressing the population growth in the GDP.

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Chapter 6 Reflection

1) One of the biggest problems with the CPI is the introduction of new goods, substitution bias, and changes in the quality.

2) The inflation rate from the area I live in, Denver metro-area, compared to my parent's area, Eagle county, is 20%.

Eagle county's inflation rate is approximately 27%

Denver county's inflation rate is around 7%

sources:

https://coloradosun.com/2022/02/12/colorados-inflation-prices-livable-wages/

http://www.usa.com/eagle-county-co.htm

3) Although I have never been introduced to the Consumer Price Index up until this chapter, I believe it is useful for weighing out the average prices in markets of goods and services. The need for accuracy of the CPI for Social Security beneficiaries, school lunches, retirees, and survivors are all important. After this assignment, I will further my understanding of CPI and how it affects us not only economically but in our daily lives.

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Chapter 5 Reflection

1) Chapter 5-4

What are the differences between real versus nominal GDP?

Nominal GDP is the amount of production of goods and services valued at current prices.

Example: According to the World Bank (IBRD), the nominal GDP of the US is currently $20.94 trillion USD.

Real GDP includes the measure of the production of goods and services valued at constant prices.

Example: The real GDP of Brazil is $1.44 trillion USD based on the data collected from the World Bank (IBRD).

link:https://datatopics.worldbank.org/world-development-indicators/

2)

The current GDP of the United States is $20.94 trillion USD. The GDP this quarter is 24.01 trillion USD and last quarter was $23.20 trillion USD. The GDP has grown from the last quarter, as a result from the circumstances of the COVID pandemic. The effects of the pandemic cannot be approximated but it links health to how GDP fluctuates.

sources:

https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-second-estimate

https://www.bea.gov/news/2021/gross-domestic-product-third-estimate-gdp-industry-and-corporate-profits-revised-3rd#:~:text=Real%20gross%20domestic%20product%20(GDP,real%20GDP%20increased%206.7%20percent.

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Macroeconomics Chapter 3 Reflection

What surprised you most about the concepts in this chapter?  Why?

The concept that international trade is is not a competition in which one country wins and the other loses. Trade can be beneficial for all parties involved.

2. What is your opinion about international trade?  Overall is it good or bad?  Why?

After reading this chapter my opinion on international trade is a positive one. I believe it is a broad and complex system that can increase efficiency for production and trade on a global level.

3. Did your opinion about trade change after reading the chapter? Can we think about trade with China and trade with Wyoming in the same way? In what ways are they different? The same?

I believe my opinion of trade has been expanded after reading this chapter. I recognize that there are many components involved with trade and that the decisions we make are intertwined with changes in the economy. Trading with China and Wyoming can be seen differently in terms of exports and imports. On the other hand, we can view the comparative advantages of trading with China and Wyoming in order to view the opportunity cost of each producer.

4. Give an example of a recent purchase you made that was primarily produced overseas.  Was there a locally produced option? Why didn't you buy the locally produced option? (And how did you define local? :^))

I recently bought a hoodie with one of my favorite album covers printed over it. It was made in Pakistan and was under $15. I believe a locally produced option in this situation could have been a hoodie sold by the official band merchandise store. I define local as the community you are immediately participating in.

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Macroeconomics Chapter 2 Reflection

1) Pick your favorite (or least-favorite)  policy-maker and find an example of a positive statement and a normative statement made by this person. Why does it matter that the statements are either positive or normative?  Does identifying which category the statement falls into change the way you evaluate the statement?

The policy maker I chose is the political revolutionary and theorist, Vladimir Ilyich Lenin. The following normative statement comes from Lenin’s book State and Revolution, “Democracy is a form of the state, it represents, on the one hand, the organized, systematic use of force against persons; but, on the other hand, it signifies the formal recognition of equality of citizens, the equal right of all to determine the structure of, and to administer, the state.” This statement theorizes that Democracy is formed by two different systems. The first system is a centralized political force that imposes on citizens. The second recognizes equality for all citizens, and equips people with systematic rights such as electing officials of their own government. I believe viewing Lenin’s claims as a normative statement allows for others to critique and analyze evidence using political philosophy as opposed to using data to validate or refute a positive statement.

2) Look at the table of propositions about which most economists agree (Table 1).  Do you agree with all of them or are there one or two about which you have disagreed in the past?

The table of propositions about which most economists agree is made of what I believe are positive statements. I believe all of these propositions have been analyzed and agreed upon by a majority of economists based on data and evidence gathered. Therefore I agree with the table, although that may change in the future.

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Macroeconomics Chapter 1 Reflection

What in this chapter made you think about an economic concept differently than your previous beliefs?

Before reading the first chapter of Brief Principles of Macroeconomics by N, Mankiw, I only had prior knowledge of concepts such as economics and market economies without knowing the full scope of how they really work in the real world. After finishing chapter 1 I was introduced to the Ten Principles of Economics which explains how economics is made up of how individuals make decisions, how they interact with one another, and the inner functions of the economy. All in all, this chapter made me realize I have a lot of ground to cover in order to get a full grasp of what economics is.

What new questions do you have now about the US economy based on this chapter?

Some questions I had after this chapter revolved around how an economist implements the Ten Principles of Economics into the real world. In addition to how economists identify how individuals make decisions based on trade-offs, prices, and what is given up to get something (cost).