Chapter 32/ Level of difficulty 2/3

Two markets are key to an open economy, those being the loanable funds market and the market for foreign-currency exchange. The real interest rate will adjust to fix the supply in the market for loanable funds from national savings and the demand, from domestic investment and net capital outflow. The market for foreign-currency exchange on the other hand the real exchange rate adjusts to balance the supply of dollars coming from net capital outflow and the demand for dollars, for net capital exports. Net capital is a shared variable in both markets, thus it is the connection amongst them. A policy may be imposed by the government and will decrease the amount of supply, but drive interest rates up. Higher interest levels reduce net capital outflow which would then reduce the amount of dollars in a foreign-currency exchange market. If the dollar would appreciate then there would be a fall in net exports. Some trade policies are designed to alter trade balance, such as tariffs , quotas and etc, but may not have such effects.

Chapter 31: level of difficulty 2/3

Chapter 31 dealt with an open economy where interaction with other economies in the world occurs freely. In such case there are two usages, the buying and selling of goods and services(product markets) and the buying and selling of assets such as stocks and bond (world-financial markets). Allowing the flow of goods to be imports and exports with a net exports, or value of a country's exports minus the value of the countries imports, this also being trade balance. In all there are also financial resources including new capital outflow which is calculated as purchase of foreign assets by domestic residents - purchase of domestic assets by foreigners. Thus, new capital outflow must equal net exports, since imports and exports happen during trade. Trade deficits happen when exports are less than imports and net exports are less than 0. Balanced trade happens when exports and imports are equal and net exports are equal to 0. While trade surpluses happen when exports are greater than imports and net exports are greater than 0. Saving, investment and capital have a relationship that is determined by manipulating the identity discovered in the previous chapters, that being y=c+I+g+NX to determine GDP, therefore the new equation becomes S=I+NX, or savings equal investment plus new capital outflow. Nominal exchange rates are the rate at which a person can trade the currency of one country for the currency of another, where values may appreciate or depreciate. Real exchange rates on the other hand are the rates at which goods and services are traded.

Article #8

Once again! David Stockman is to criticize the works and the workers of the Fed, claiming they do not know how to control the system. This time he specifically goes against Janet Yellen, whom is the chairman at this time. He claims that her Keynesian methods and tactics are not trying to help the economy, instead there is a deterioration that will sooner or later lead to a collapse. He then mentions that the US is trying to avoid the declining interest rates that are occurring in other parts around the world. Then he goes about to say that the zero interest rate and the negative interest rate would not help, and that she would need to stop thinking about the past and rather focus on present issues. He talks about how households and businesses have peek debt and that there is no sort of movement made in order to help them. Rather the Fed has decided to go around the issue, instead of actually fixing the result. Slowing not only economic but job growth as well. Then he goes and argues how there's been no progress that rather the jobs are the same jobs that had already existed. Not only this but he also points out how through most of her arguments Yeller contradicts herself. He is angry at the Fed and the job that they are doing.

Chapter 30

This chapter helped explain inflation and money growth, the relationships among both, and the difficulties that come along. Inflation being the increase in prices, but a decreasing value in the money held. Hyperinflation being inflation that exceeds over fifty percent per month. And deflation being the drop in prices and the increasement in value of money. In the long run the level of prices and the level at which the demand equals the supply will adjust. The quantity theory of money, asserts that the quantity of money available determines the price level and the growth rate in the quantity of money available determined by the inflation rate. Then there is the dichotomy of nominal variables (variables measured by money units) and real variables(variables measured with physical units). Bringing about the monetary neutrality which is the proposition that changes in the money supply do not affect real variables, since real variables are not measured in money. Velocity of money is the rate at which money changes hands. Represented by the nominal value(price level times the quantity of output) over the quantity of money. Which can be modified into M•V= P•Y, relative to the quantity equation. The inflation tax is a tax that is taxed on everyone holding money, that refers to the revenue the government raises to pay its spending by printing money. The fisher effect comes about when there is an adjustment of the nominal interest rate and the inflation rate. Costs of inflation would include the shoe leather cost, and the menu costs as well as distortions and confusions including that of the redistribution of wealth.

Chapter 29: The Monetary System

Cash may be considered to be a claim to goods and services in the future. Money can be considered to be wealth, or a set of assets in an economy that people regularly use for goods and services. Money may be a medium of exchange, an item that buyers give to sellers to purchase goods or services, a unit of account, "yardstick" to post prices and record debts, or a store of value an item that people can use to transfer purchasing power from the present to the future. Where liquidity is a main factor, or the ease with which an asset can be converted into the economy's medium of exchange. Like when the value of money falls due to a price rise. Money then can be considered to be commodity money, money that takes form with intrinsic value, it will still have value even if not used as money, like gold and cigarettes back in the day. Or fiat money, money without intrinsic value that are used as money due to government decree.

Article Review #7

Diana Furchtgott-Roth and the Actual unemployment rate being 11.4% rather than 6.2%
The article focuses on how the work force has declined recently. The creation of jobs in March were half of what was predicted(126,000) , but would somehow get 'revised' to be much greater than that. (200,000) Although there was some steady but slow economic growth, the trend has been heading completely down. Participation rates have been decreasing, little but still decreasing. The labor force from last year was 62.9% compared to the year 2006 when the rate was 66.2% a gap of 8.2 million Americans! Participation from older workers last year was higher than 2006, meaning more elderly keeping jobs! Now 3 million men,who are middle age, are subtracted from the workforce of today. Women have 2.5 million fewer women in the workforce. 800,000 fewer younger workers, 400,000 fewer teens! There was a small increase in those who are getting an education from 56-57%. Due to all the benefits given by the government it is much easier to not work and gain benefits than to work and not gain the same amount, including food stamps, healthcare, disability benefits, etc. The author states "fewer Americans working, slower GDP growth, and more pressure on the federal deficit and entitlement programs". The author also states how it is better for each state to chose those indicated for the benefits rather than just in general. Americans who have left the labor force during the recession show no signs of returning. This was driving me insane since so many numbers have to be refined in order to look "pretty", not only that but due to long term workers,who are pretty old, other people are not able to join the work force thus not providing for future growth. All other workers in different groups are declining although only 1% increasement for the people in school happened. It's so insane!! Nowadays it is seen to be "better" to not work and receive benefits instead of not receiving them and working for 'nothing'. Not only do the numbers in the work force decrease, GDP growth is slower, and there is so much pressure on the government programs. This is insane!