macroeconomicclassblog2023

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Chapter #15

Question:

Spring of 2020 the world economy experienced a significant decrease in SRAS (short run aggregate supply).  That was followed by a decrease in SRAD (short run aggregate demand).  Draw those on a graph.  What would you expect to happen in your local economy as a result of those shifts? How do you expect the short run and the long run to be related? How long do you expect the short run to be? Is it always the same for both AD and AS?  Will the new long run equilibrium be at a lower level? Why or why not? 

My Answer:

I would expect the price of the goods and services in my local economy to go up and the demand for those items to decrease. Short run and long run are going to be related because the level of output for the long run is shortly affected by the price increase in the short run. I would expect the short run to be six months or less. When there is a long run and prices adjust then the long run equilibrium will be at a lower level. 

Question:

Now jump to spring 2023.  Where are we now? Has SRAS shifted back out or are we still restraining it? Has AD fully recovered? What are you seeing in terms of changes in the price level?  What do you predict for the coming year (price level and GDP growth? What is the basis for your prediction?

My Answer:

SRAS has been shifting back, but it will take time for it to go back to the way it was before Covid. AD is still recovering from the years of Covid. Due to the SRAS and AD, the price level is higher than before covid. I predict that in the next year, with SRAS and AD going back to normal, the price level will slightly drop and that GDP growth will rise. The basis of my prediction is based on the effects of the SRAS and AD during Covid. 

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Chapter #16:

Question:

This chapter talks about appropriate monetary and fiscal policies to affect the economy.  We've watched both types of policies in action throughout the pandemic and into the recovery.  What were the initial Federal Reserve Board's actions in their attempts to lessen the effect of Covid-19 on the economy? Were they successful?  How about now?  I updated this question in July when the FRB was regularly pushing interest rates up and tightening the money supply in an attempt to get inflation back to around 2%.  Have they been successful?

My Answer:

The Federal Reserve Boards gave unlimited liquidity to banks, so that banks could make new loans to support household and small businesses. They were successful with this and kept the bank a helpful source for households and businesses. This is a form of quantitative easing and it raises inflation. Because it had a high risk of raising inflation, the FRB stopped once it wasn't needed anymore. The FRB is still trying to get the inflation rate back to around 2%, but has not been successful yet. 

Question:

How about the federal government? Were their initial programs useful? What should they be doing now? Why? Are they following your recommendations for avoiding a deep recession?

My Answer:

The federal governments created stimulus checks in order to encourage people to borrow and interact with the economy. This was successful for that time, but now the interest rates are affected by that money from the stimulus checks. Now, the federal government should be focused on reaching a reliable inflation rate instead of a high one. Inflation rates are at 4.98% and are currently going down (US). If they don't lower inflation rates, Americans will suffer from less savings and less access to goods and services. This would severely harm the economy and the standard of living. The government is currently trying to do this to lower costs for households.

Works Cited:

“US Inflation Rate (I:USIR).” US Inflation Rate, https://ycharts.com/indicators/us_inflation_rate#:~:text=Basic%20Info,long%20term%20average%20of%203.28%25. 

[macroeconomicclassblog2023]

Chapter #14

Question:

Find an article talking about the US trade deficit and analyze it in terms of the concepts in this chapter.  Do you agree with the author's perspective? Why or why not?

My Answer:  

The article I chose is called, America's Trade Deficit Surged in 2022, Nearing 1 Trillion, and it was written by Ana Swanson. She mentions mostly statistics and how the deficit keeps growing. She also mentions the U.S. wanting to diversify their imports from one main country (China) to multiple to avoid risks. For example, the U.S. has started to import more goods from Mexico because Mexico built more factories to make the goods. The author didn't put her perspective in the writing because it was supposed to educate on that statistics and why everything is the way it is. (The Article:  https://www.nytimes.com/2023/02/07/business/economy/us-trade-deficit.html )

Question:

How are trade deficits/surpluses related to capital flows?  How are they related to the exchange rate?  (Do try to write this all out -- it is very complex and you probably need to sketch out changes on graphs to really begin to understand it.)  Does the US owe money (Does the US government or US citizens make payments on a loan)  to countries with whom we have a trade deficit?

My Answer:

Trade deficits are related to capital flow because with trade deficits, more money is being sent out than is being brought in. So, because there is a deficit with the trade, the capital flow is negatively impacted. The exchange rate is the rate of switching out one currency for another. So, if there is a trade deficit, it can reduce the exchange rate from one currency to another. The U.S. does owe money, but the U.S. is not paying it all back. If someone were to make payments on the loan it would probably be the government and the citizens. The government would find a way to make citizens pay for it. 

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Chapter #18:

Question:

The mountain above is Denali - you made it to the peak! Congratulations!  I hope you have enjoyed the course and are saddened to see it end.  What concepts or theories did you find most interesting and/or useful?  Is there an area where you changed your thinking?

My Answer:

Before this class, I didn’t know much about anything macroeconomics related. This course has helped me understand the basics of countries around the world. The concept I found the most interesting was about exports and imports. I never knew that net exports were related to GDP. I also never considered the concept of open versus closed economies and how that affects trade and the standard of living. I can’t think of an area where I changed my thinking because it was a long course, but I’m sure I did at some point.

Question:

Re this chapter:  Which debate do you consider most important and interesting?  Which side do you agree with? Why?

My Answer:

I found the debate about the government balancing its budget the most interesting. I agreed with the pro side because of the impact it can have on future generations. If we don't address the problem now then it will only get worse for future generations. I can also understand the con’s side about it taking away the attention from other policies that spread income throughout generations, but I can’t ignore the fact that this debt is only getting larger each year and that if it is put off for the future generation that there will be heavier responsibilities on poor people. For example, in the textbook, there was a statistic that all Americans owed around 40,000 dollars in debt. It made me think about poor people that would struggle to pay that right now and about how much worse that struggle would get if the number kept rising. So, I believe that we need to start to balance our debt right now so that future generations don’t have to deal with the stress of paying off even more debt.

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Chapter #17:

Question:

Describe the short run trade-off between inflation and unemployment.  Why is there not a long-run trade-off?  How long do you think the short-run lasts? Or do you believe there is a trade-off at all - many economists don't.  Why?  Is our current inflation helping to reduce unemployment? What is the reasoning behind your answer?

My Answer:

According to the Phillips curve, the short run trade-off between inflation and unemployment is a negative correlation. When inflation is high, unemployment is low. And when unemployment is high, inflation is low.

There is not a long-run trade-off because, after a while, unemployment will return to its natural rate. I would consider a short-run less than 6 months. I do believe there is a trade off because if inflation raises wages, then more people will be motivated to work more hours.

I think our current inflation is helping to reduce unemployment. Because of the price of goods and services, people are starting to work these jobs to afford them. So, with the price of goods and services, people that would usually be unemployed like stay-at-home parents have to get a job to afford to take care of their family.

[macroeconomicclassblog2023]

Chapter #13:

Question:

Post your 3 favorite margin notes from this chapter. Why did you highlight and comment on these particular points in the text?

I know some of you don't take notes as you read - just jot down three things that you found interesting in the chapter and why. Give me three full paragraphs - the why question is important.  And you should be sure you are actively reading each chapter -- these chapters are dense.  Just quickly reading through is not enough for understanding.

My Answer:

1)The first thing I found interesting in this chapter was the concept of net exports and trade surplus, deficit, and a balanced trade. Net exports are simply a nation's exports minus its imports. A surplus depends on the net exports. When there are more exports than imports, there is a trade surplus. If the exports equal the imports then there is a balanced trade. And if exports are less than imports, there is a trade deficit. Trade surpluses and deficits both affect the nation's GDP. Surpluses raise the GDP, while deficits lower the GDP. This is important because the GDP is one of the main things being watched by a nation and it is important to keep it in a good range. Trading can help keep the GDP under control. 

2)Nominal and real exchange rates caught my interest during this chapter. Nominal exchange rates are related to the exchange rate of currency between different countries. Appreciation and depreciation relate to the value of nominal exchange rates. Real exchange rates are related to the trading of goods and services from one country to another. Real exchange rates determine what countries export certain goods and services. This topic is important because it determines the net exports which help determine the GDP.  

3) Another topic that caught my interest was the positive impact from an open economy. With an open economy goods and services are accessible year round, unlike a closed economy where the climate controls what goods and services are available. For example, fruits and vegetables are available year round in grocery stores due to the U.S. open economy. Without the open economy, the U.S. would have to rely on goods that could grow during winter in a colder climate, which is not a lot. This is important because open economies have helped the knowledge of technology which has grown hugely in the last 20 years. 

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Chapter #12:

Question #1:

What are the costs of inflation (there is a list in the text)? Which is most important? How about deflation? Would that be a problem and for whom? The FRB worries more about deflation. Why? Do you agree? Why or why not?

My Answer:

The costs of inflations are shoeleather cost, menu costs, inflation-induced tax distortions, and the cost of unexpected inflation. I would say the cost that is most important and most damaging is the cost of unexpected inflation. 

Deflation would be a problem for poor people more than rich people because it makes incomes fall and unemployment rise. The FRB worries more about deflation because it is a sign of a deeper economic problem which can be harder to fix than inflation problems. I do agree with this because inflation is so focused on that solutions can be made in advance, but with deflation, since it is not as focused on and can happen very unexpectedly, it is harder to create solutions on the spot.

Question #2:

Currently the risk appears to be inflation.  Is that something you consider when making economic choices in your life?  If you are still in high school ask your parents if they consider future inflation.

My Answer:

Since I still live with my parents inflation is a bigger problem for them than it is for me. That doesn't mean that it doesn't affect me because it does. With inflation comes higher prices for college and everyday items. Since inflation affects the value of money, over the years college will get more expensive and hopefully minimum wage will increase to keep up with inflation. Oil prices are another thing that affects me. Since I have to commute to work and college, I have to pay for gas. With the price of gas rising it takes a lot of money out of my paychecks which affects my ability to pay for other goods and services.

Also, the effects of inflation can change what age I am able to retire at. Therefore, inflation is something I consider when I think about my career options and what I want to be doing in my 60s and 70s.

[macroeconomicclassblog2023]

Chapter #11:

Question #1:

The phrase "printing money" tends to be tossed around in discussions about the money supply.  How important is cash (the dollar bills in your wallet)  to the overall money supply?

My Answer:

Money supply includes cash, coins, and bank accounts. All of these things contribute to the amount of money that is flowing in the economy. Since cash is one of those contributors, it is important to the money supply, but maybe not as much as bank accounts. With bank accounts, the Fed can somewhat control what goes on with the money, but with cash the Fed can’t force households to buy government bonds.

Question #2:

Think about the structure of the FRB.  How are they related to the Federal government? Do you think they make independent, non-political decisions?

My Answer:

The FRB is the Federal Reserve Boards, also known as the Federal Reserve System. It is the nation’s central bank. It is run by seven members who are picked by the President of the United States, because of this I do not believe that they make independent, non-political decisions.

Question #3:

The FRB spent most of the first two years of the pandemic increasing the money supply. Why was that? Did they "overshoot"?  Are you worried about current and future inflation?  I check the FRB press releases for an easy way to find current policy (use the Monetary Policy filter.)

My Answer:

The FRB spent all that time increasing the money supply because of the rates of unemployment and to stabilize the economy. When Covid-19 struck, everyone was affected because it affected the economy. So, the FRB increased the money supply with the help of stimulus checks. With all this extra money going around, some businesses were able to stay afloat and people were able to make it through the challenging times. 

Normally money supply grows by 7% each year, but during Covid the money supply grew by 27% (Contributor). Due to this percent, I am worried about the future of inflation and what laws and actions can be taken to reduce the money supply. In the book, it mentions open-market operations and the Fed’s lending to banks. Those two things can help decrease the money supply, but is it enough to bring it back down to a normal level?

Question #4:

At this point the FRB is reining in money supply growth. Why? What tools are available to them to do this?

My Answer:

If the FRB does not start decreasing the money supply growth then inflation will start to harm the economy. The FRB can do this by open-market operation and lending to banks. The FRB can also alter reserve requirements for banks and pay interest on reserves.

Works Cited:

Contributor Ron Surz. (n.d.). Money printing and inflation: Covid, cryptocurrencies and more. Nasdaq. Retrieved April 22, 2023, from https://www.nasdaq.com/articles/money-printing-and-inflation%3A-covid-cryptocurrencies-and-more#:~:text=The%20money%20supply%20normally%20grows,quickly%20%E2%80%93%20the%20floodgates%20are%20open.

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Chapter #10:

Question #1:

Why will there always be at least some unemployment?  Give an example of a public policy that affects the unemployment rate.  Is it positive or negative? Why?  What do you think the "right" amount of unemployment is? Why?

My Answer:

There will always be at least some unemployment because people will always be moving jobs to find one that they fit well with. Also, public policies can encourage people to become unemployed. One of these policies is Unemployment Insurance which gives unemployed people weekly paychecks if they meet certain criteria. One of these criteria's is that the unemployed person did not choose to be unemployed. This is positive because it has helped people through the Covid-19 pandemic. When people were getting laid off of their jobs and getting sick from covid, unemployment insurance helped these households stay afloat and stay involved in the economy. I don’t know what you mean by the “right” amount of unemployment, but I’m going to assume you mean the time that people are allowed to stay on unemployment. I think unemployment time should rely on the problem that caused the unemployment and how long it would take to solve. This would help people to try to not rely on unemployment to avoid working, but would also benefit the people that actually need the unemployment.

Question #2:

The US has many programs that affect the unemployment rate from disability programs to  unemployment insurance.  If you were designing these programs would you consider incentives to work?  Are time limits reasonable?  Should increases in the unemployment rate be considered a cost to a program? (So for example, if we structured a daycare/pre-school program so that it subsidized moms who want to stay home with their children as an alternative to paid care outside the home, how would you assess the cost of that program?)

My Answer:

If I were to be designing those programs I would consider time on unemployment an incentive to work. Like I was saying in my previous answer, time should be considered from case-to-case about how much time unemployment benefits should be applied. This would include the time for health to improve and the time for the person to find a job. 

I would assess the cost of that program to how much the other parent makes and if there are health reasons for the mom to stay home with the child instead of going to work. The higher the salary of the other parent, the less money the mother should receive. Because if the other parent has a higher salary, then they can help pay for daycare while the stay-at-home parent found a job. Also, health can differ from different mothers, some moms take longer to recover from birth than others. So, if the mother does have health problems that make it hard to find a job, I would increase the amount for that family. 

Question #3:

Should programs for helping with unemployment consider the type of unemployment? Why or why not?

At this time there are roughly twice as many job openings as there are people looking for work.  Does that change your answer at all?  How is economic growth affected when the unemployment rate runs below the number you chose above as the "right" rate?

My Answer:

Programs for helping with unemployment should definitely consider the type of unemployment. This is because there are a lot of different reasons for people to be unemployed. Some unemployment is more serious than others and those more serious unemployed cases should receive better benefits. 

No, that does not change my answer. The economy grows when more people are working, but that is not always possible.

[macroeconomicclassblog2023]

Chapter #8

Question #1:

This chapter is an important link in how we understood government policies throughout the Covid-19 crisis.  The Federal government continues to run record deficits, originally in an attempt to avert or minimize a recession/depression, but apparently ongoing as the original rationale (the pandemic lockdowns) has ended.  Look back at this chapter and discuss how large annual Federal deficits should affect the market for loanable funds.  Is that what we have seen happen (where is the equilibrium interest rate now - up or down?)  Now, how is inflation factored in to interest rates? What are your expectations with respect to interest rates? Why?

My Answer:

When there is a federal budget deficit, the market for loanable funds lowers national savings making interest rates rise and investments fall. The equilibrium interest rate is still higher than usual even though it is lower than in the summer of 2022 (David). Like I mentioned earlier, when inflation occurs interest rates rise. My expectations are for the federal budget deficit to even out in the future and for interest rates to lower back to their normal rates. That's my expectation because too high of interest rates is harmful to the economy.

Question #2:

How does the loanable funds market help define/choose which investment projects are funded each year?  What do interest rates have to do with ROI (return on investments)? Expected ROI tends to be lower during a recession than it is during a boom.  How does that affect demand for money during a recession? During a boom? And finally, how does all of this affect economic growth in the long run? Why?

My Answer:

Loanable fund markets can help define what the inflation rate of the economy is and which investments are being impacted. The loanable funds market helps investors decide whether they are going to invest in safe investments or investments that are riskier but have a higher output. 

Households supply loanable funds while companies and borrowers demand loanable funds. So, when it comes to households, when the interest rates are higher there the return on investments are lower meaning there is less supply of loanable funds. 

When the ROI is lower, less people are investing so there is more of a demand than a supply. When the ROI is higher during a boom, more people are investing than the demand needed. 

All of this affects economic growth in the long run because when there is more ROI and more people are investing, the economic growth will increase. And when ROI is lower, and less people are investing than normal, the economic growth will decrease.

Question #3:

How does this affect your personal plans?

My Answer:

This affects my personal plans because before this class I had no knowledge on this topic and I now know that ROI’s decrease and increase and that it is better to invest when there is an increase in the return on investments.

Works Cited:

David Chang, C. F. C. (2023, March 23). Federal Reserve Interest Rates & How They Affect you. The Motley Fool. Retrieved April 19, 2023, from https://www.fool.com/the-ascent/federal-reserve-interest-rates/#:~:text=The%20current%20Federal%20Reserve%20interest%20rate%2C%20or%20federal%20funds%20rate,as%20of%20March%2022%2C%202023.

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Chapter #9

Question #1:

You do need to do a little math to ensure this chapter makes sense.  Think about the logic though.  Why do you save?  Why does a firm need to pay you something to use your "extra" money? (The rate of return on bonds is generally positive.)

My Answer:

I save in order to afford goods and services in the future. It also allows you to relax about any future emergencies because you have money saved up if something does happen. Firms need to pay an interest rate to encourage people to let someone else borrow their money in return for more money in the future.

Question #2:

How do you balance risk and return when you make investments (or how will you do that in the future)?  Right now you are making a significant investment in your own level of human capital.  Did you think about potential jobs/salaries when you chose your major?  How about risks associated with the strength of the economy?   Find the salary of a job you think you will be qualified for when you graduate and compare that to the salary that you might make without a degree.  Then compare the different to the cost of your degree.

My Answer:

You can balance risk and return by not investing in just one investment. For example, buying into multiple stocks instead of putting all my money into one and hoping for the best. 

When I chose my salary, I wasn't sure what I wanted to do and I knew that business would contain good knowledge for any future careers. So, I did not think about any future potential jobs, but I did think about how I might make more money starting out than someone who doesn't have a degree. I also did not think about the risk associated with the strength of the economy because I chose business to learn more about the economy and jobs I would be interested in. 

For this I chose the city of Milwaukee, Wisconsin. When I graduate I will be qualified for an entry level sales account manager position that makes a salary of $44,883-46,901 (Sales). Without a degree the median entry level salary in Milwaukee is $33,318 (Entry). The cost of my tuition is $6,000 for the two years. I have been able to cover that by FAFSA, grants, and scholarships. I chose Colorado Mountain College because I did not want to start my career in education debt. With my student refunds I am either going to use it for a down deposit on an apartment or use it to go to a bigger college for a bachelors. So, with me not paying any loans or anything out of pocket, there is no difference with my degree and salary. 

Question #3:

What do you think  - good investment? Or should you change majors?  How do you value the non-monetary aspects of your potential career?  Does that change your results?

My Answer:

So, with that being said, I believe that I am making a good investment. Instead of starting working without a degree, I will already have a foundation to build off of. I don’t think I will change majors since I picked a good one to transfer with if I choose to do so.  There are a lot of non-monetary aspects to the job I chose as an example. One that stuck out to me was a continued education. If I were to apply to this job and get the job, I would be able to continue my education and that would help with future jobs after that. This does not change my results.

Works Cited:

Entry level salary in Milwaukee, WI $30,168. Ziprecruiter. (n.d.). Retrieved April 19, 2023, from https://www.ziprecruiter.com/Salaries/Entry-Level-Salary-in-Milwaukee,WI

Sales manager jobs in Milwaukee, WI. Indeed. (n.d.). Retrieved April 19, 2023, from https://www.indeed.com/q-Sales-Manager-l-Milwaukee,-WI-jobs.html

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Chapter #7

Question #1:

This chapter focuses on the importance of productivity as a part of growth in GDP, the somewhat obvious idea that you can't consume something that was never produced.  Because of that, consumption is tied directly to productivity.  How does that concept support national subsidies in education and health?  How about infrastructure?  How should we choose the appropriate subsidy for activities that improve productivity? (Think about costs and benefits in your answer -- who pays and who benefits?)

My Answer:

When national subsidies are used in health care, the price of goods and services decreases making health care becomes more accessible for everyone. This makes the health care system more productive in the effects on the whole society of a country. A way for national subsidies to be used is in health insurance. Some low income insurances are subsidized like Medicaid making healthcare more accessible. A benefit of this would be the health of workers in the country. If the country has more accessible healthcare, then workers have the opportunity to be healthier which leads to better productivity in their workplace. 

When subsidies are used in infrastructure, it can be explained as, “money given by a government for projects that are beneficial to basic public services” (Infrastructure). These subsidies allow the standard of living to rise in a country meaning citizens benefit from the new infrastructure. 

One of the most important subsidies that improve productivity are healthcare subsidies. When the population is healthy, physically and mentally, the productivity in a country rises because the population is spending less time worrying about health issues and going through health issues, so workers focus more on their jobs. When people don’t have to wait for their health issues to get severe, health problems can be fixed faster and more time can be spent working. Taxes would increase to go to these subsidies, but with better productivity, more goods and services would be available and the prices of those goods and services would decrease and become more affordable. So, everyone that pays taxes would pay and everyone in the country would benefit from the cheaper prices of goods and services. 

Question #2: There are only two ways to get more economic growth - more output per unit of resource (productivity increases) or use more resources (employees in this case).  More employees means population growth, frequently a "hot topic".  What are the negatives associated with additional population growth? What are the positives?  (In terms of growth in GDP).  Where do you fall in the discussion? Why? Should we subsidize parents (there are current discussions in Congress around this)? Why or why not?  (All population growth at this time is coming from immigration, total fertility is negative. Immigration is of course well below historical levels.)

My Answer:

Some negatives surrounding population growth include more people negatively affecting the climate, the possibility of running low of food, and overcrowding. Some positives surrounding population growth include more workers, more educated people to create solutions to problems, and more goods are produced. While I understand the point of if there are more people then more solutions can be created, I believe that if the U.S. focused more on affordable education that more inventions would be made without a bigger population. There are already enough creative people, but a lot of those people don’t have the finances to learn more about important topics covered in college. Also, I think that we need to focus on how to boost productivity instead of letting the population control it. No progress is going to be made if everyone is relying on the population to fix a problem. 

I do believe that parents should be subsidized. I can see why this is a controversial political topic because it affects people who don't have children, but I do believe that it will benefit childless people in the future. When these children are grown up, they are the next generation to be doctors, lawyers, scientists, etc. So, with subsidies, these children can get a better education and help our society in the future. Taking care of children is expensive and we as a society should not make it harder for low income people to become parents. I believe that everyone should have the right to be a parent or to be childless and that should not depend on their finances. It’s easy to look at low income families and think that the parents shouldn't have had the kids because they can’t afford them, but I have seen families where poor children receive more love from their parents than rich children. The amount of love a child receives does not rely on finances. So, when it comes to subsidies for low income parents, I believe that if it's what they need for their children to succeed they should get it. Especially since those children are our society's future, we should take care of them. This includes food, education, etc.  

Works Cited:

“Infrastructure Subsidy Definition.” YourDictionary, https://www.yourdictionary.com/infrastructure-subsidy.

[macroeconomicclassblog2023]

Chapter #6

Question #1:

Go back to the section in the chapter on the problems with the CPI.  How serious are they?

My answer:

There are three problems with CPI. First, substitution bias is when a consumer chooses to buy less of a product or another product if the original product’s price increases. The CPI doesn’t take this into account and can overstate the increase in the cost of living. The second problem is new goods being introduced. When there is more variety, the value of a dollar increases, and the CPI does not measure that. And the final problem is unmeasured quality change. If a product’s quality changes and the price stays the same, then the value of a dollar for that product drops. Since the CPI does not measure quality, it can mess up calculations. These are serious problems because substitution bias will always happen, and new goods will always be introduced. Also, the quality of a product will not always be the same throughout the years.

Question #2:

Most of you live in rural areas.  Is the inflation rate you face different than that of urban areas? Why or why not?

My answer:

Studies have shown that rural areas with less competition experience higher rates of inflation than urban areas with more competition. I live in Steamboat Springs, Colorado, and our population is 13,390. For a town to be considered urban, it had to have 50,000+ people (What is rural). An Iowa State University professor noticed that, “From 2020 to 2022, rural households paid an estimated $8,120 extra due to inflation, almost 9% more than urban households over the same time period” (Dorn). Rural wages didn’t increase as fast as urban wages, but the cost of expenses grew faster in rural areas (Peters). So, inflation hits rural households harder than urban households.

Question #3:

Are all of those uses appropriate? Is the accuracy of the CPI more important for some uses than for others? Do you pay attention to the CPI and use it in any way?

My answer:

Since CPI measures urban populations only, not all of these uses are appropriate for rural populations. For example, urban and rural areas experience different wages and rents. So, what would work for urban wages and rent wouldn't work for rural wages and rent. While rent calculations wouldn't work for everybody, child support payments would benefit from the CPI. The CPI increases child support payments due to inflation each year. I don’t focus on it, but it still affects me. The CPI raises the minimum wage to account for inflation, meaning it affects most people including me.

Works Cited:

Dorn, A. (2023, February 2). Have Rural Americans been hit harder by inflation? NewsNation. Retrieved February 26, 2023, from https://www.newsnationnow.com/business/your-money/rural-americans-inflation/#:~:text=From%202020%20to%202022%2C%20rural,University%20professor%20Dave%20Peters%20found.

Peters, D. (2022, July 11). New report describes impact of inflation on rural households. News. Retrieved February 26, 2023, from https://www.extension.iastate.edu/news/new-report-describes-impact-inflation-rural-households

What is rural? USDA ERS - What is Rural? (2019, October 23). Retrieved February 26, 2023, from https://www.ers.usda.gov/topics/rural-economy-population/rural-classifications/what-is-rural.aspx#:~:text=The%20Census%20Bureau%20defines%20an,cities%20of%2050%2C000%20or%20more. 

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Chapter #5

Question #1:

Our textbook is deceptively straightforward to read, so I'd like to spend a paragraph talking about how to actively read a textbook. A method I have used successfully is to first look at all of the section headings in each chapter.  Take a few moments to turn each of those headings into a questions.  For example, Section 5-1's Heading is "The Economy's Income and Expenditure".  That can become "How are an economy's incomes and expenditures defined?" or "What are an economy's income and expenditure?" 

Then, as you read the section, actively read for the answer to that question.  It is a good idea to write these questions and answers down also.

Now, for this Reflection, choose the section heading for which you wrote a question you find interesting.  In your Reflection give me the question, the answer, and a current events example of an application of the theory from the section.

Answer:

Section Heading: Is GDP a Good Measure of Economic Well-Being?

My Question: Is GDP an effective way to measure the well-being of a country?

The Answer: One of the main reasons for GDP is to measure a country's ability to have all the items necessary for a good life. While that's good, it also tends to leave out a lot of things. For example, anything happening outside of the market is not considered. It doesn't consider the environment, and it doesn't mention the distribution of income. So, yes the GDP is a good indicator of the whole economic well-being of a country, but it is not a good way to measure the actual well-being of a country because of the things it doesn't take into consideration.

A Current example of this theory:  In 2021, the United Nations (UN) adopted the System of Environmental-Economic Accounting-Ecosystem Accounting (SEEA EA). This takes into consideration natural capital and how the environment is finite. The UN mentions how the GDP doesn’t take the health of the environment into account and that the SEEA EA will protect and restore nature and when that change is made, and then the economy will be rewarded (United Nations). 

Question #2:

In addition, look up current GDP of the US.  What is it this quarter? How about this quarter last year?  Is it growing or shrinking?   Why does that matter?  This is a Covid question of course --- are we still seeing the effects of the pandemic in output?  Is GDP related to health?  That is a critical question for this and the next pandemic -- think about it as you learn about GDP.

Answer:

The current GDP of the US is 23.32 trillion US dollars. The US is currently in the first quarter of the GDP year. The latest percentage of GDP growth in the first quarter was 2.7% (GDPNow). In quarter one of 2022, the percent change in GDP growth was -1.6% (News release). In 2023, the GDP is growing, but in 2022 it was shrinking. This matters because when the GDP of a country is growing, it means the economy is doing well. So, in Q1 of 2022, the economy was not doing well. 

Statista, an online platform that offers statistics and reports mentioned, “This rate of annual growth indicates a return to economy normalcy after 2020” (Real GDP). Due to Covid-19, the economy greatly suffered and the GDP reflected it. Now, Statistica is saying, “...the economy as a whole has also returned to its pre-pandemic growth trajectory” (Richter). 

While health may not be included in the GDP, it does affect the GDP. The whole economy relies on workers to create the goods and services sold in a market. So, without a healthy population, the GDP would shrink due to fewer workers in markets. Okun’s Law proves this point that when unemployment rises, there are losses in the country's production (Kenton). Take, for example, in 2020, when Covid-19 spread and people's health was at risk, so unemployment rose. The GDP severely shrunk because of the loss in the country's production due to rising unemployment. 

Works Cited:

GDPNow. Federal Reserve Bank of Atlanta. (n.d.). Retrieved February 26, 2023, from https://www.atlantafed.org/cqer/research/gdpnow#:~:text=The%20GDPNow%20model%20estimate%20for,2.5%20percent%20on%20February%2016.

Kenton, W. (2022, October 29). Okun's law: Definition, formula, history, and limitations. Investopedia. Retrieved February 26, 2023, from https://www.investopedia.com/terms/o/okunslaw.asp

News release. Gross Domestic Product (Third Estimate), GDP by Industry, and Corporate Profits (Revised), First Quarter 2022 | U.S. Bureau of Economic Analysis (BEA). (2022, June 29). Retrieved February 26, 2023, from https://www.bea.gov/news/2022/gross-domestic-product-third-estimate-gdp-industry-and-corporate-profits-revised-first#:~:text=Real%20gross%20domestic%20product%20(GDP,real%20GDP%20increased%206.9%20percent.

Real GDP growth rate U.S. 2022. Statista. (2023, February 2). Retrieved February 26, 2023, from https://www.statista.com/statistics/188165/annual-gdp-growth-of-the-united-states-since-1990/#:~:text=In%202022%20the%20real%20gross,and%20high%20growth%20in%202021.

Richter, F. (2023, January 27). Infographic: The U.S. economy is back on trend after Covid Dip. Statista Infographics. Retrieved February 26, 2023, from https://www.statista.com/chart/29207/us-real-gdp-growth/ 

United Nations. (2021, March 2). Countries to consider ground-breaking change to economic reporting that includes natural capital. United Nations. Retrieved February 25, 2023, from https://www.un.org/en/desa/countries-consider-ground-breaking-change-economic-reporting-includes-natural-capital 

[macroeconomicclassblog2023]

Chapter #4

Question #1: In most large cities you can now use your cell phone to call Uber or Lyft instead of hailing a taxi. Would you expect this to affect the prices of taxi trips? Why or why not?  Try drawing this as two markets (two graphs) - one for taxis and one for ride-sharing companies. Which curves shift in which market? Why? How does that affect equilibrium price in each market?

Answer: Yes, since the demand curve declined, the equilibrium price would also decline. The taxi market has a negative shift in the demand curve and the supply curve. Since there is less demand for taxis because of the option of Uber, there would be an excess supply of taxis. Since there is an excess supply of taxis, the cost of a taxi trip would decline to try to attract more customers. When Uber made the option for calling a car, their price of time increased because of higher demand and shortage of drivers. Meaning there would be a positive shift in the demand curve. So, the equilibrium price for an uber would be higher than the equilibrium cost of a taxi because of the accessibility of an Uber.

Question #2: Minimum wage is another classic example. What happens to the quantity demanded of labor when the minimum wage is increased? How about the quantity supplied of labor? This one is a single market - unskilled labor - but with a price (wage) floor.  Do you draw the wage floor above or below equilibrium? Why?  Does the position of the wage floor with respect to the equilibrium wage change when the minimum wage rises from $7.35 to $15? Does it change enough to affect your answer? (Note: a wage floor is shown as a horizontal line at the floor rate.)

Answer: When minimum wage increases, the quantity demanded of labor decreases because businesses are not going to want to pay more towards salaries. When employers stop employing as many people, unemployment rates rise. This means the job market has a surplus of workers looking for work. A wage floor during the rise of minimum wage would be above the equilibrium, but if the minimum wage was unbinding, the wage floor would be below the equilibrium. It depends on the location if the wage floor rises above the equilibrium. If it's a town that already has a usual hourly wage above $16, then the wage floor would stay below the equilibrium wage. But if it was a town where the usual hourly wage was $10, then the price floor would rise above the equilibrium.

[macroeconomicclassblog2023]

Chapter #3

Question #1: What surprised you most about the concepts in this chapter?  Why? What would you like to do more research on? Where would you look first for more information?

I found it interesting that only one person could have the comparative advantage in both goods due to opportunity costs. With the example the book gave us about Ruby and Frank, I assumed that Ruby had the comparative advantage in both goods. But with opportunity costs Ruby only has so much time in a day and can’t make more meat and potatoes than Frank in a day. I would like to do more research on trade between the U.S. and China and what is being traded. I would look at government websites first for this information. 

Question #2: Can we think about trade with China and trade with Wyoming in the same way? In what ways are they different? The same?

Trade with China is not the same as trade with Wyoming because of certain factors like comparative advantage of product types. China has the comparative advantage when they make clothes. China has approximately 44,000 textile factories giving them the upper hand (Fashion). Wyoming exports mainly beef and plant products because Wyoming has 29 million acres of farming land (AcreTrader). Compared to the U.S, China had less than half of the amount of farmland (Card). Because of this Wyoming has the comparative advantage of beef and plant products. They are similar in the way that they both have a comparative advantage to each other, but they are different because they have the comparative advantage in different items. 

Question #3: 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 Converse shoes that were made in Vietnam. There are shoes produced in the U.S., but most shoes are made in different countries because it is cheaper to make them overseas. I didn’t buy a pair of shoes made in the U.S. because I like the way that Converse look and buying locally wasn't even something I was thinking about. I defined local by being made in the U.S. because recently we have been learning about trading between countries, so I immediately assumed the teacher wanted me to talk about the U.S.

Works Cited:

AcreTrader, I. (n.d.). Average farmland prices in Wyoming (WY). AcreTrader. Retrieved February 2, 2023, from https://acretrader.com/resources/wyoming-farmland-prices

Card Agricultural Policy Review. The Center for Agricultural and Rural Development (CARD) website. (n.d.). Retrieved February 2, 2023, from https://www.card.iastate.edu/ag_policy_review/article/?a=40#:~:text=As%20shown%20in%20Table%203,200%2Dhousehold%20village%20in%20China.

Fashion statistics china. FashionUnited. (n.d.). Retrieved February 2, 2023, from https://fashionunited.com/statistics/china 

[macroeconomicclassblog2023]

Chapter #2

Question #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? (This can be either local or national - politicians of all stripes are logical choices.)

During an event with the College of Criminal Justice, Alexandria Ocasio-Cortez, a U.S. Representative for New York’s 14th congressional district, stated ”The United States incarcerated more people than any other country in the world” (A conversation). This is considered a positive statement because it is a fact about America. It matters that she made a positive statement because it set up the rest of her argument on current incarceration policies surrounding juveniles. By identifying her statement as a positive statement, the audience can use this information to back up her normative statement. 

Later in her speech, Alexandria Ocasio-Cortez makes a normative statement on how to start getting rid of current incarceration policies surrounding juveniles. She states, “When it comes to juvenile detention, we have a school to prison pipeline. And I think that one of the main ways that we address juvenile detention is by stopping policies that treat schools like mini jails” (A conversation). It matters that this is a normative statement because she is saying what the government should do to keep juveniles out of jail. By viewing this as a normative statement, I can realize that people could argue with this statement unlike the positive statement. With the positive statement, she uses statistics that would be hard to argue against. But with the normative statement, people can argue with her solution to the problem. 

Positive and normative statements change the way you listen to the speaker. When you are listening to a positive statement you can listen to the facts. And while you are listening to a normative statement you can tell what the person believes in and sometimes their morals. Normative statements aren't always the correct way to approach a situation, but it is a possibility of how society can approach the situation. 

Question #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?  Why did/do you disagree? 

The table of propositions was filled with views that I agreed and disagreed with. Some of the ones that I disagreed with were primarily because it would have negative impacts on the lower class. And I agreed with some of the views because of my own beliefs. Most of the views on the proposition table are views that most economists agree with, but I would have also liked to see what kinds of topics economists could not agree on. But since this is mainly what they agree on, I will mention why I agree or disagree with their views. 

I agree with four of their main arguments in the proposition, but I will mention the main one I agree with. The main one I agree with is the first question, “A ceiling on rents reduces the quantity and quality of housing available.” I agree with this statement because if the government controlled how much apartments would cost, more people would be able to afford an apartment. For example, if the minimum wage went up, usually the price of rent would increase as well because the landlords would be able to gain more profit. So, if the government put a cap on how much landlords could price their apartments for, then the price of apartments would become less expensive as the minimum wage increases. Meaning more people would be able to afford an apartment, so there would be less quantity of apartments. Also, the quality would decrease because if an expensive apartment started to become the same price as a low income apartment, then the landlord of the expensive apartment would no longer have the money to make it an expensive apartment. It would no longer have nicer amenities because the landlord would be making less of a profit. 

I also disagree with four of the propositions that economists agree on. The main one I disagree with is that, “Government subsidies on ethanol in the United States should be reduced or eliminated.” My reasons for disagreeing with this are more about the present than the future. I can acknowledge that ethanol is worse for the environment than gasoline, but things need to be changed before subsidies for ethanol are eliminated. For example, if the price of ethanol no longer has subsidies, then gasoline will need more subsidies. Ethanol gas is cheaper than gasoline, so if you just take away the subsidies then there is no other option then to pay more for gas. Not everyone can afford the price of gasoline with no ethanol, so there would need to be subsidies on pure gasoline. Also, the farmers that grow corn for ethanol would have to change their source of income to more food related items. This would have a huge negative impact on these farmers and they would need to be supported during this like they are supported while making the corn for ethanol. 

Works Cited: A conversation with Alexandria Ocasio-Cortez. YouTube. (2019, April 24). Retrieved February 1, 2023, from https://youtu.be/NaOJORnWbVo