Chapter 28/ unemployment/ level of difficulty 2/3

Chapter 28 was all about unemployment. Although unemployment is quite difficult to measure it is done by the BLS. There are three main categories where people or the population are split into. Those three are employed, unemployed, and not in the labor force. Those employed include the workers that are paid employees, or have worked in someone else's business. Those unemployed were available for work but had tried finding another job in a month. Not in the labor force include full time students, home makers, retirees. The labor force sum of employed and unemployed. The unemployment rate being the number of unemployed over the labor force times 100. The labor force participation rate us the percent total of adult population of the US into labor force. Natural rate of employment refers to that of the fluctuations in the unemployment rate and the cynical unemployment being the deviation of unemployment from the natural rate. The cycle of movements in and out of the force makes it much more complicated for statistics to be interpreted. Discouraged workers would like to work but have given up trying to find a job. Short term would be considered to be not such a big deal, but long term is a significant big deal. Rn employment will never fall to zero rather it will fluctuate around the natural rates. The time it takes to find another job is another factor that affects statistics. If public policy was to help with tech advances then the natural rate of unemployment will fall.

Chapter 27 level of difficulty 2/3

Chapter 27 relatively brings about the tools of finance in a field where the decision makings determined by the allocation of resources over time and the handling of risk are quite important. There is a difference between present and future value, which may be determined by interest rates and total years. Compounding is the accumulation of a sum of money (in a bank) where the interest earned remains in the account to earn additional interest in the future. (1+r)^n • 100, where n is the number of years, and R is the interest rate. Discounting on the other hand is finding the present value for a future sum of money. Where X, amount of money now, n, number of years, and R,interest rate (X/(1+r)^n). Managing risk involves the idea of risk adversion, thus diminishing marginal utility occurs, less utility from additional dollar. Markets for insurance help keep a peace in mind, not eliminating risk but rather spreading it efficiently. 2 problems arise from insurance such as adverse selection and moral hazard. Diversification of firm-specific risk help replace a single risk with a large number of smaller unrelated risks. There is a trade off between risk and return where the more a person puts into stocks the greater the risk or the return. Asset Valuation needs of fundamental analysis and of the efficient markets hypothesis, stating informational benefits and the random walk. The market irrationality includes psychological beliefs and speculative bubbles where the price of an asset rises above what appears to be its fundamental value.

Article 6 Review

David Stockman attacks the statistics that are given when dealing with the economic conditions in which we are living in today. He goes on and on about the level and amount of jobs that were given in December due to the seasonal timing. He then states that although there were certain factors that possibly increased the amount of employment, such as vacations and the production to increase due to the increase of consumption. But then he goes on to state that those reasons are not enough to actually bring about such a statistical 'jump', that much rather the data is falsified to make it seem that the United States's economy's well being is much better than what it actually is. That much rather a recession is to be faced due to such bizarre numbers that are implemented on such important statistics. He talks about how a recession is to be seen close towards the near future due to the bubbles and fake numbers. He states how the bubble is about to "burst" and how everyone will understand the reality of things.

Chapter 26 level of difficulty 2/3

Bond markets, stock markets and banks are all financial institutions that are able to show how the financial system works when dealing with such markets. They are leading into the money that can then be used to be borrowed by others. The main purpose of these financial systems is to allow those who need money in the instant to be able to get some from those who are willing to contribute into helping them. For a closed economy it is necessary to have the national savings be equivalent to that of investments. Money still remains the same in the nation, but those who may have their hands on it are those that will with time change, for different people will have the money at different periods of time. Supply and demand are determinants of the loans being made, and the interest rates that come along with them. Any other policy that will later be added to affect the interest rate must first be observed on the supply and demand curves to see how the policy is to affect the interest rate. National savings, thus then include the savings of both private and public savings, since it is a nation's savings.

Chapter 24-level of difficulty 2/3

Chapter 24 was about measuring the costs of living. That involving the consumer price index also known as CPI. The CPI demonstrates what the typical consumer is buying, or the overall costs of goods and services. In order to calculate the CPI there must be a fixed basket, where the prices for each of the goods is found, then after all the smaller individual costs are found the basket's price is found. There must be a base year in order to find such calculations. The inflation rate can then be determined after the CPI is computed. Housing, transportation and food take up majority of the costs that are paid by consumers. Then there is the Producer price index, or PPI. Which is simply what the producers/firms typically buy. A leading indicator includes that when the PPI rises then the CPI follows. Typically due to the fact that producers then pass on the costs to consumers. Although calculations can be made there are problems in the measuring cost of living. Those including the substitution bias,an introduction of new goods and the unmeasured quality change. The GDP deflator is a ratio of nominal GDP to real GDP, where prices of all goods are produced domestically. The CPI includes the prices of goods and services by producers.  Indexation is an automatic correction by law/contract of dollar amount. Including effects of inflation, or COLA. There is a difference when dealing with real and nominal interest rates where real includes the corrected effects of inflation and nominal does not.