ECO 212 Macroeconomics in a Global Economy ~/~ Home ~/~ Syllabus ~/~ Video Notes ~/~ Papers ~/~ Mac Web App ~/~ Textbook Website ~/~ Online Lectures ~/~ Blackboard ~/~ Office hours

DAILY SCHEDULE OF ASSIGNMENTS: Click on dates below for the reading assignments, video assignments, outcomes, key terms, and key graphs for each lesson.

August	September	October	November	December
Mon. Wed. | | | | 8/22- 1a 8/24 - 1b 8/29 - 1c 8/31- 2a - Syllabus Quiz	Mon. Wed. 9/5 Labor Day 9/7 - 2b 9/12 - 3a 9/14 - 3b 9/19 - 3c 9/21 - 20a - Paper 1 due 9/26 - 20b 9/28 Exam 1	Mon. Wed. 10/3-12a 10/5 - 12b 10/10 -12c 10/12- 9a - Paper 2 due 10/17 - 9b - last day for paper 1 rewrites 10/19 - 7a 10/24 - 8a 10/26 - 22Wa 10/31 Review |	Mon. Wed. | 11/2 Exam 2 11/7 - 14a 11/9 - 15a 11/14 - 16a - last day for paper 2 rewrite 11/16 - 16b - Paper 3 due 11/21 - 10a 11/23 No Class 11/28 - 13a 12/2- 13b	Mon. Wed. 12/5 Exam 3 12/7 Review - last day for paper 3 rewrite 12/12- Final Exam - - 1:45-3:30 J253 -Study Guide Optional Exam 3 retake: 9:55-11:40 J253 12/14 Optional Exam 3 retake: 1:45-3:30 J253 -

UNITS AND LESSONS - ASSIGNMENTS:

Unit 1: ECONOMICS and GLOBALIZATION 1a - Introduction to the Course 1b - What is Economics and the 5Es 1c - Making Choices: Production Possibilities (PPC) and Benefit-Cost Analysis (BCA) 2a - Economic Systems and Globalization 2b - Role of Government and Government Finance 3a - Demand 3b - Supply 3c - Market Equilibrium and Efficiency 20a -Why we Trade: Comparative Advantage 20b - International Trade and Foreign Exchange Markets

Unit 2: INTRO. TO MACROECONOMICS 12a - AD/AS Model: AD Graph and Determinants 12b - AS and Equilibrium: UE, IN, and EG 12c - Stabilization Policies and AS/AD in the Long Run 9a - Unemployment (UE) 9b - Inflation (IN) 7a - Measuring the Economy: GDP 8a - Economic Growth (EG) 22Wa - Economic Growth in the LDCs

Unit 3: MACROECONOMIC POLICY 14a - Money, the Money Market, and the Fed 15a - How Banks Create Money 16a - Monetary Policy (MP) 16b - Other Monetary Policy Issues 10a - The Spending Multiplier 13a - Fiscal Policy 13b - Other FP Issues and Government Debt

---

---

Unit 1: Economics and Globalization Lesson 1a: The Class and the Math 1a Introduction Welcome to ECO 212! This course will cover the area of economics commonly defined as macroeconomics. The main goal of macroeconomics is to gain a better understanding of the causes of, and remedies for, UNEMPLOYMENT and INFLATION, as well as the factors that affect ECONOMIC GROWTH. We will also discuss the two types of economic growth, what I like to call "ACHIEVING THE POTENTIAL" and "INCREASING THE POTENTIAL". Please buy the textbook as soon as possible. If you buy your textbook online, order it today. See the syllabus for the correct textbook. The textbook should cost less than $30 if you buy it online. While you wait for your textbook to arrive there is still some work that you can do. To begin, I suggest you do the following: - read the syllabus - check out our Blackboard site. Click on the menu links and see what is there - take the Syllabus Quiz (see link on Blackboard) - you may also begin some of the chapter 1 assignments, + see: LESSONS + especially the online reading: The 5Es of Economics Email me or use the Blackboard Discussion Board if you have questions. Many students end up dropping or failing this course due to the lack of basic math skills. If your math skills are weak you should consider building them before taking this course. If you are required to take MTH 060 or MTH 082 and have not yet done so, do not take this economics course until you have successfully completed one of them. I have posted a math quiz on our Blackboard site. Take the math quiz on Blackboard. If you score less then 14 or 15, consider dropping ECO 212 and taking a math class first. Good luck and start studying.  1a Something Interesting - Why are we studying this? Optional: a funny look at some major ideas of economics by the Stand-up Economist. Principles of economics, translated https://www.youtube.com/watch?v=VVp8UGjECt4 *NOTE: There will be a short case study for most lessons ("Something Interesting - Why are we studying this?"). The case study does not include everything from the lesson but it will highlight an interesting and important topic. The case studies are meant to grab your attention and help you APPLY a concept from the lesson to a real world issue. At first the case study may not make sense. In fact, many will appear contrary to common sense, (like why are high prices GOOD for the people suffering from a natural disaster), but after finishing the lesson you should have a better understanding of the case study or ask for help in class or on the Blackboard discussion board. 1a Assignments: Readings Read: Syllabus Ch 1, pp.1-7 Ch.1, Appendix on Graphing Buy the textbook -- see the syllabus Buy the Videos: -- see the syllabus Lecture Outline 1a Assignments: Video Lectures WHAT IS ECONOMICS: THE STUDY OF SCARCITY 1.1.1 Scarcity - Defining Economics 6:35 [MyNotes] 1.1.2 What Economists Do 13:20 [MyNotes] 1.1.3 Micro and Macroeconomics 11:21 [MyNotes] EconMovies- Episode 1: Star Wars (Scarcity, Choices, and Exchange) REVIEW OF GRAPHING CONCEPTS 1.2.1 Using Graphs to Understand Direct Relationships 9:50 [MyNotes] 1.2.2 Plotting A Linear Relationship Between Two Variables 9:57 [MyNotes] 1.2.3 Changing the Intercept of a Linear Function 8:42 [MyNotes] 1.2.4 Understanding the Slope of a Linear Function 7:28 [MyNotes] OPTIONAL: Khan Academy Exercise: Graphing Points Khan Academy Exercise: Graphing Points 2 1a Outcomes - What you should learn TOPICS Introduction to the course What is Economics? Basic math and graphing Math Quiz OUTCOMES Basic math skills How to find class information Explain and illustrate a direct relationship between two variables, and define and identify a positive sloping curve. (Appendix) Explain and illustrate an inverse relationship between two variables, and define and identify a negative slope. (Appendix) Be able to calculate the slope of a line. Define economics and describe the four components of the definition: social science choice scarcity maximizing satisfaction What are economic models and why do economists use them? Explain the importance of ceteris paribus in formulating economic principles. Differentiate between microeconomics and macroeconomics. Define and give examples of the four types of resources (factors of production) and know the payment for each 1a Key Terms Key Terms Flash Cards - Class Activities - Click Here Key Terms Flash Cards - What is Economics? - Click Here Key Terms Flash Cards - Math - Click Here Key Terms: CLASS ACTIVITIES: Pre-quiz, Clicker Quiz, Required Activity, Yellow Pages, Tomlinson Videos on Thinkwell, Video Notes, Practice Exercises, LESSONS webpage, WHAT IS ECONOMICS?: economics, economic model, microeconomics, macroeconomics, utility, rational choice, opportunity cost, benefit-cost analysis (marginal analysis), ceteris paribus (other things equal assumption), MATH: direct (positive) relationship, inverse (negative) relationship, slope of a line, positive slope, negative slope, origin, horizontal (x) axis, vertical (y) axis 1a Practice Quiz (under construction) 1a Formulas Slope = rise/run Slope = vertical change / horizontal change Slope = marginal value of the total 1a Key Graphs   Any Point on a Graph Represents Two Numbers Direct Relationship Inverse Relationship Calculating Slope 1a Review Videos Episode 5A: Models & Theories [3:26 YouTube mjmfoodie] Episode 6: Graph Review [4:22 YouTube mjmfoodie] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

---

Unit 1: Economics and Globalization Lesson 1b: How to Reduce Scarcity - Introduction to Economics and the 5Es 1b Introduction The "5Es of Economics" are not from the textbook. I borrowed the concept (with many modifications) from another textbook many years ago. I believe it concisely explains the purpose of economics. Also, it begins to introduce students to the economic way of thinking. The economic problem that we all face, that all countries face, that the world faces, is SCARCITY. Economics is the study of how we can reduce scarcity. What I like about the 5Es model is that it shows us that there are only five ways to reduce scarcity. Only five. I call them the "5Es" of economics. For each of the 5Es: (1) learn the definition, (2) understand examples, and (3) most importantly, know how they reduce scarcity and help to increase society's satisfaction. This is where you learn that it may be good when the price of plywood increases greatly as the result of a hurricane. And why it might be good when Coca-Cola lays of one fifth of its workforce. Or, that the price of gasoline may be too low. Really! In this MACROeconomics course we will focus on Economic Growth and Full Employment. Efficiency, efficiency, and equity are the focus of my MICROeconomics classes and few economists study "Reducing Wants". The overall goal of economics is to REDUCE the SCARCITY of goods and services. Economic growth and full employment are two (of five) ways to do this. Pay close attention to the new definition of economic growth presented in the online reading. It is different from what you might hear in a news report. Also, pay attention to HOW such economic growth is achieved: - finding more resources, - getting better resources, - and inventing better technology. This type of economic growth involves INCREASING THE POTENTIAL of the economy to produce goods and services. Full employment helps an economy ACHIEVE ITS POTENTIAL by using all of its resources. Again, notice the slightly different definition than is commonly used for full employment. We are not just talking about labor, but ALL available resources. There are three issues that macroeconomics studies: (1) unemployment - UE, (2) inflation - IN, and (3) economic growth - EG, (UE, IN, and EG). 1b Something Interesting - Why are we studying this?* When a hurricane hits the coast of Florida, prices of many necessities like food, water, hotel rooms, gasoline, and even plywood, tend to increase. Some governments try to prevent such price increases and call them "price-gouging". See: http://www.csmonitor.com/1992/0910/10083.html But economists think that such price increases are GOOD for the people ravaged by the hurricane. WHY? Why is it GOOD when the prices of products (like plywood) increase during a natural disaster? See: https://www.masterresource.org/price-gouging-law/defense-price-gouging/ ANSWER: Allocative Efficiency *NOTE: There will be a short case study for each lesson. The case study does not include everything from the lesson but it will highlight an interesting and important topic. The case studies are meant to grab your attention and help you APPLY a concept from the lesson to a real world issue. At first the case study may not make sense. In fact, many will appear contrary to common sense, (like why are high prices GOOD for the people suffering from a natural disaster), but after finishing the lesson you should have a better understanding of the case study or ask for help in class or on the Blackboard discussion board. 1b Assignments: Readings Syllabus The 5Es of Economics (VERY IMPORTANT!) Ch. 3: "Efficient Allocation" pp. 58-59 Ch. 3 "Diminishing Marginal Utility" pp. 49 and 117 Ch.1, Appendix on Graphing Lecture Outline 1b Assignments: Video Lectures Macroeconomics Unit 1 Intro: Basic Economic Concepts (AP Macro) (YouTube ACDCLeadership 1:38) [MyNotes] Scarcity and Exchange - EconMovies #1: Star Wars (YouTube ACDCLeadership 6:39) 1b Outcomes - What you should learn TOPICS Introduction to economics and scarcity The 5Es of Economics and how they increase society's satisfaction "Economic Growth": achieving the potential vs increasing the potential OUTCOMES What is the "invisible hand" of capitalism? What is "SCARCITY" as it is defined in economics? (What two things cause the scarcity of goods and services? What is "erskinite"? Is erskinite scarce? What is the goal of economics?  What are society's three options for dealing with scarcity? What do the 5Es do? For each of the 5Es: Define Explain how it affects society's satisfaction Give an example The 5Es: ECONOMIC GROWTH ALLOCATIVE EFFICIENCY PRODUCTIVE EFFICIENCY EQUITY FULL EMPLOYMENT How does economic growth differ from the other Es?  What are the three ways to achieve economic growth? Economic Growth, what is the difference between "Achieving the Potential" and "Increasing the Potential"? What are the three ways to achieve productive efficiency? What is the President Obama example? Explain how it can be used to show that equity can increase society's satisfaction. Why did we use such a strange example? What is the law of diminishing marginal utility? What does "marginal" mean? Why it is GOOD for the people of Florida if, after a hurricane strikes, the price of plywood (or other products) increases from $10 a sheet to $30 a sheet Why it was GOOD when the Coca-Cola company (or other companies) lays off 6000 workers as they did in the year 2000. Why the price of gasoline in the United States is TOO LOW (We may have to wait until after we finish chapter 5 to truly understand this.) How does our new definition of full employment differ from what you will hear on the news? 1b Key Terms Key Terms Flash Cards - Click Here Key Terms: scarcity, economic growth, allocative efficiency, productive efficiency, equity, full employment, marginal, law of diminishing marginal utility, President Obama example 1b Practice Quiz (under construction) 1b Key Figures / Graphs   The 5Es of Economics 1b Review Videos What Is Economics? [2:45 YouTube jodieecongirl]

---

 

Unit 1: Economics and Globalization Lesson 1c: Making Choices: Production Possibilities Curve (PPC) and Benefit Cost Analysis 1c Introduction In the 5Es lesson we learned that economics is about making choices. Choices are forced upon us as a result of scarcity. Here we will study a graphical model, the Production Possibilities Curve (PPC) that shows us that we MUST MAKE choices and it highlights some of the consequences of making choices. Then we will look at HOW to make good choices by using Benefit Cost Analysis (BCA). The production possibilities curve will show us that all decisions have costs. Economists call these "opportunity costs". ALL COSTS IN ECONOMICS ARE OPPORTUNITY COSTS. Whenever we discuss the "costs" of doing something we will mean the complete opportunity cost. What is the connection between the PPC and BCA? Well, when studying the PPC you will learn the important concept of "opportunity cost". Learn the definition well. Since all costs in economics are opportunity costs, then when using BCA, "marginal costs" means the additional opportunity costs. Also, since economic growth is one of the three macroeconomic issues. We will use the PPC to demonstrate the two types of "economic growth": - an economy ACHIEVING ITS POTENTIAL - and an economy INCREASING ITS POTENTIAL Achieving the potential is caused by reducing unemployment or achieving productive efficiency. On the graph it is moving from a point inside the PPC to a point on the SAME CURVE. Increasing the potential, or what we will call economic growth, is shown on the PPC as the whole curve shifting out to a NEW CURVE. We will see this again in chapter 8. 1c Something Interesting - Why are we studying this? Why would airbags in cars cause more accidents (see the link below)? After studying this lesson you should be able to use Benefit Cost Analysis (MB=MC) to answer this question. Drivers with airbags may take more risks A similar question for skiers is why did the invention of avalanche airbags cause more people to become caught in avalanches (see below)? After studying this lesson you should be able to use Benefit Cost Analysis (MB=MC) to answer this question. In a March 2013 blog post written by Utah Avalanche Center Director Bruce Tremper . . . Tremper says airbags are providing a false sense of security, leading more skiers into high-consequence terrain, and thus decreasing the effectiveness of said airbag. "Each gizmo we buy to increase our safety usually cause us to increase our level of risk at the same time. For instance, when we added seat belts and airbags to cars, yes fatalities decreased, but it also allowed us to drive faster, farther, crazier and talk on our mobile phones at the same time. So safety measures usually work but not nearly as well as we would hope because people just increase their risk (and “utility”) at the same time. In avalanche airbag case, we will also get more powder, more fun, and more risk in the bargain . . . . people will increase their exposure to risk because of the perception of increased safety, which will cancel out some, but not all, of the effectiveness of avalanche airbag" What are avalanche airbags? https://www.youtube.com/watch?v=h7QFRXc0R8M 1c Assignments: Readings Ch 1: Production Possibilities Model, pp. 11-21 Ch. 1: p. 5, "Marginal Analysis: Benefits and Costs" Ch. 1: pp. 13-14, "Optimal Allocation" (especially Fig 1.3), Drivers with airbags may take more risks Ch 1: p. 14, "The Economics of War" (box) Lecture Outline 1c Assignments: Video Lectures PRODUCTION POSSIBILITIES 1.4.1 Understanding the Concept of Production Possibilities Frontiers 24:46 [MyNotes] 1.4.2 Understanding How a Change in Technology Affects the PPF 10:10 [MyNotes] MAKING CHOICES: THE ECONOMIC WAY OF THINKING -- BENEFIT-COST ANALYSIS (also called Marginal Analysis or Cost-Benefit Analysis) EconMovies- Episode 2: Monty Python and the Holy Grail - Marginal Analysis (YouTube ACDCLeadership 5:27) Thinking at the Margin (YouTube LearnLiberty 4:32) [MyNotes] Incentives and Marginal Analysis (YouTube MrHurdleHistory 8:54) [MyNotes] OTHER Micro 1.1 The BIG Picture- AP Economics Overview (with links to playlists) (YouTube ACDCLeadership 12:49) ECONMOVIES Episode 3: Monsters Inc. and the Production Possibilities Curve 1c Outcomes - What you should learn TOPICS PPC (Production Possibilities Curve) BCA (Benefit Cost Analysis or Marginal Analysis) OUTCOMES Production Possibilities Construct a production possibilities curve (PPC) when given appropriate data; what is the production possibilities curve (PPC) or production possibilities frontier (PPF)?; what does it show? What are the assumptions behind the PPC Illustrate the following using the production possibilities curve: we must make choices choices have opportunity costs the law of increasing costs the effect of unemployment the effect of productive inefficiency how present choices affect future possibilities the effect of international trade two types of "economic growth" it does NOT show the optimum product mix (allocative efficiency) Explain WHY the PPC has the shape that it does -- concave to the origin. What is the law of increasing cost? Why are there increasing costs? Why is the PPC concave to the origin? (Draw, Define. Describe all graphs) What would the PPC look like if there were constant costs? What does a point outside the PPC represent? What two things (2 Es) would a point inside the PPC indicate? Give some real-world applications of the production possibilities concept. Summarize the general relationship between investment and economic growth. What is the difference between "achieving the potential" and "increasing the potential"? Show the difference on a PPC. What are the two types of "economic growth" and how are they shown on a PPC? What would cause a PPC to shift inward? Use a PPC to illustrate the effect of international trade Be able to draw and explain the Circular Flow Model Benefit Cost Analysis define benefit cost analysis (BCA) and use it to solve problems define "marginal" and give examples define marginal benefits (MB) and marginal costs (MC) explain why we ignore fixed, or sunk, costs ("Don't cry over spilt milk.") know what happens if MC increase? decrease? know what happens if MB increase? decrease? draw MB and MC on a graph and explain their shapes be able to find the optimum choice from a table of total costs and total benefits and from a table of marginal costs and marginal benefits use BCA to explain why Drivers with airbags may take more risks or why skiers with air bags may take more risks what is a "sunk cost" (or fixed cost) and why are they ignored when using benefit-cost analysis? "Don't cry over spilt milk " If you are deciding whether or not to come to class today, why does it not matter that you have already paid tuition? Why is the fact that you have paid tuition irrelevant when trying to decide whether to attend class today or skip? 1c Key Terms Key Terms Flash Cards - Click Here Key Terms: PPC: production possibilities, necessity of choice, law of increasing costs, concave to the origin, opportunity cost, constant cost, benefit cost analysis (marginal analysis), economic growth, consumer goods, capital goods, shrinking PPC, nonproportional growth BCA: marginal costs (MC), marginal benefits (MB), MB=MC Rule, sunk (fixed) costs 1c Practice Quiz (under construction) 1c Formulas MB = MC MB = change in Total Benefits / change in Quantity MB = TB / Q MC = change in Total Costs / change in Quantity MC = TC / Q Notice that I will use a triangle () to mean "change in" 1c Key Graphs Production Possibilities Schedule and Curve PPC: Achieving Full Employment and Achieving Productive Efficiency (Achieving the Potential) PPC: Economic Growth (Increasing the Potential) Benefit Cost Analysis 1c Review Videos - Production Possibilities Curve- Econ 1.1 [3:56 YouTube ACDC Leadership] - Shifting the Production Possibilities Curve (PPC)- Econ 1.2 [5:35 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 1: Economics and Globalization Lesson 2b: The Economic Role of Government and Government Finance 2b Introduction Now, you should have a good idea of the characteristics, benefits, and problems of the two main types of economic systems and understand how, and why, countries seem to be moving toward a market, or more laissez-faire, system. Here we will examine the economic functions of government in a market economy. Most economists, and politicians, agree on these general principles, BUT they may disagree strongly on the degree of involvement the government should have in the economy. I think, most people agree on WHAT the government should do, but they disagree on HOW MUCH. We learned in lesson 2a that market economies are efficient and that centrally (government) planned command economies are inefficient. So whenever there is government involvement in a market economy we should ask WHY? If market economies are efficient and efficiency reduces scarcity, why would the government get involved? We will learn that sometimes the government is needed to ASSIST a market economy to be efficient and sometimes a market economy is inefficient and the government is needed to FIX it. After looking at the economic functions of government we will look at government finance in the United States. Latter in this course we will discuss how the goverment uses spending and taxation to affect the economy. Here we learn what the government spends its money on and where governments get their revenue (taxes). 2b Something Interesting - Why are we studying this? Skim the news articles below about raising taxes on gasoline and putting taxes on soda and junk food. After studying this lesson you should understand why many people support these taxes. Why might gasoline prices be too low? http://www.npr.org/templates/story/story.php?storyId=4858826 Why are several cities and states considering a tax on sodas? http://www.stltoday.com/news/local/illinois/buying-soft-drinks-in-illinois-would-cost-more-under-tax/article_5eccc299-6c48-5b44-9643-95bce5365dee.html http://www.sfgate.com/bayarea/article/Tax-on-soda-to-be-floated-in-San-Francisco-4932025.php Why did Mexico tax junk food and soda? http://www.politico.com/story/2014/01/mexico-soda-tax-101645 2b Assignments: Readings Economic Functions of Goverment Textbook pp. 99-101, 104-108 Microeconomics Chapter 16 (found on our Blackboard site): pp 338-346 - Government Finance; - Federal Finance; - State and Local Finance; - Local, State, and Federal Employment; - Apportioning the Tax Burden; - The VAT Lecture Outline 2b Assignments: Video Lectures Role of Government in a Mixed Economy (YouTube - Daniel Mares15:53) [MyNotes] When is a Potato Chip Not Just a Potato Chip (YouTube-LearnLiberty 4:46) Public Goods and Asteroid Protection (MRUniversity 2:30) EconMovies 7: Anchorman (Efficiency and Market Failures) A Deeper Look at Public Goods (MRUniversity 7:55) Where do your tax dollars go? (YouTube - Test Tube News 3:44) 8.2.2 Analyzing the Tax System (8:19) [MyNotes] OPTIONAL: Tax Brackets and Progressive Taxation Khan Academy (4:14) 2b Outcomes - What you should learn TOPICS Economic Functions of Government in an Market Economy Government Finance: Expenditures and Revenues Average and Marginal Tax Rates Progressive, Proportional, and Regressive taxes OUTCOMES Functions of Government Understand the five functions of government in a market economy stabilization policies: what should the government do if unemployment is high? if inflation is high? Negative Externality: too much produced without government, why? government micht tax or regulate to reduce consumption Positve Externality: Too little produced without government, why? government might subsidize or produce the product itself to increase production Public good nonexcludable and nonrival NONE produced without government government must produce Why are public schools, public parks, and public libraries NOT "public goods"? Government Finance What are the major revenue sources and major expenditures for the federal, state, and local governments? Define and give examples of progressive, proportional, and regressive taxes. Be able to calculate average tax rates, marginal tax rates, and taxes paid Calculate average tax rates and marginal tax rates. What are the PROS and CONS of using a lottery to finance government? Discuss the progressivity or regressivity of the following taxes: federal income tax sales tax payroll tax (Social Security Tax) property tax exhaustive and non exhaustive government purchases or government purchases vs. government spending, benefits received principle, vs. ability-to-pay principle (sometimes called the equal sacrifice principle) and the law of diminishing marginal utility 2b Key Terms Key Terms Flash Cards - Role of Government - Click Here Key Terms Flash Cards - Government Finance - Click Here Key Terms: Role of Government: consumer sovereignty, monopoly, natural monopoly, antitrust, transfer payments, market intervention, market failure, negative externality, positive externality, public goods, private goods, rivalry, nonrival, excludability, nonexcludability, free-rider problem, macroeconomic stability, fiscal policy, monetary policy, expansionary fiscal policy, easy money policy, contractionary fiscal policy, tight money policy, Government Finance: government purchases, exhaustive, transfer payment, nonexhaustive, deficit spending, personal income tax, payroll tax, benefits received principle, ability-to-pay principle, average tax rates, marginal tax rates, progressive tax, proportional tax, regressive tax, value added tax (VAT) 2b Practice Quiz (under construction) 2b Formulas Average Tax Rate = taxes paid / income Marginal Tax Rate = change in taxes paid / change in income Marginal Tax Rate = taxes / income   Notice that I will use a triangle () to signify "change in" 2b Review Videos Micro Unit 6 Intro- Market Failures and the Government [2:31 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 1: Economics and Globalization Lesson 3a: Demand 3a Introduction If the price of pizza goes up, what happens to the demand for pizza? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     NOTHING! Nothing happens to the demand for pizza if the price changes!   The next three lessons introduce the demand and supply model for explaining how prices arise and change in a market economy. Learn these lessons well. Do the assigned problems. Draw the graphs in the Yellow Pages and while you are reading and studying. DRAW GRAPHS! Get used to using the graphs to help you answer questions. If you are avoiding drawing the graphs you will do poorly and not get the practice that you need to learn the concept. So why doesn't the demand for pizza change if the price changes? Because economists have a different definition of "demand". Demand is NOT the quantity that we buy. If the price of pizza goes up we will buy less, but that is not what "demand" means in economics. Economists tend to be precise with their definitions and sometimes their definitions are different than the more commonly used definitions. Things like "scarcity", "investment", "cost", "demand", and "supply", have different definitions in economics than what you may already know. Learn our definitions! Demand is not how much we buy. Demand has a different definition in economics. "Demand" means the "demand graph". Economists use models (like the supply and demand model) to simplify the real world. They do this by isolating certain variables from all the clutter found in reality. Then by changing one variable at a time economists can see what effect it will have. In this lesson we will learn the economic definition of DEMAND and plot the demand graph. Then, we will look at one variable at a time to see what effect they have on the demand curve. We call these variables the "non-price determinants of demand". They are: Pe, Pog, I, Npot, T or "PPINT". LEARN THEM! LEARN THEM WELL! Know how each one affects the demand curve. Be sure to do the Yellow Pages and other Practice Activities until you understand the concept well. 3a Something Interesting - Why are we studying this? See the picture below. VanCamp's Pork and Beans are on sale (price is lower). Notice that there is a can of Campbell's Pork and Beans on the sale display. What is that Campbell's Pork and Beans can doing on the display for VanCamp's Pork and Beans? After studying this lesson you will be able to draw a graph illustrating what happened to the demand for Campbell's Pork and Beans when a customer took a can out of their shopping cart and placed it on this display of VanCamp's beans that were on sale. 3a Assignments: Readings Ch 3, pp. 47-53 Optional, but very useful Lecture Outline 3a Assignments: Video Lectures 2.1.1 Understanding the Determinants of Demand 11:58 [MyNotes] 2.1.2 Understanding the Basics of Demand 11:54 [MyNotes] 2.1.3 Analyzing Shifts in the Demand Curve 8:13 [MyNotes] 2.1.4 Changing Other Demand Variables 10:43 [MyNotes] 2.1.5 Deriving a Market Demand Curve 9:16 [MyNotes] OPTIONAL: Linear Demand Equations Part 1 with exercises (econclassroom.com 6:41) Linear Demand Equations -- Shifts in Demand (econclassroom.com 14:16) Econ 2.1 Demand and Supply Explained (1 of 2) (6:42) The Determinants of Demand (10:25) 3a Outcomes - What you should learn TOPICS Demand: Define Draw Describe Determinants OUTCOMES define demand (note: it has a DIFFERENT DEFINITION in economics) If the price of pizza goes up, why does the demand for pizza stay the same? be able to correctly draw and label a demand graph why do economists employ the ceteris paribus assumption when creating a demand curve? what is the law of demand? why is the demand curve downward sloping (three explanations) list the non-price determinants of demand (Pe. Pog, I, Npot, T) and understand how they affect the demand schedule and curve. This is VERY IMPORTANT. BE ABLE TO DO THIS! See the 3a/3b/3c yellow pages. explain the difference between the a "change in the quantity demanded" and a "change in demand" what is an increase in demand and a decrease in demand and show how they affect the demand schedule and the demand curve what is "market demand"? what is that Campbell's Pork and Beans can doing on the display for VanCamp's Pork and Beans (see picture at left)? Which non-price determinant of demand explains why that Campbell's soup can is there? 3a Non-Price Determinants of Demand and Supply Non-Price Determinants of Demand (PPINT) Pe -- expected price Pog -- price of other goods 1) substitute goods 2) complementary goods 3) independent goods I -- income 1) normal goods 2) inferior goods N -- number of POTENTIAL consumers T -- tastes and preferences Non-Price Determinants of Supply (PPPTTN) Pe -- expected price Pog -- price of other goods produced by same firm Pres -- price of resources T --technology T --taxes and subsidies N -- number of producers/sellers   NON-PRICE DETERMINANTS OF DEMAND Pe -- expected price Pe in the future D today Pe in the future D today Pog -- price of other goods 1) substitute goods P Maxwell House coffee D Folgers coffee P of one product D of its substitute 2) complementary goods P of wieners D of buns P of one product D of its compliment I -- income 1) normal goods Income D for normal goods Income D for normal goods 2) inferior goods Income D for inferior goods Income D for inferior goods Npot -- number of POTENTIAL consumers Npot D Npot D T -- tastes and preferences Tastes for a product D for that product Tastes for a product D for that product   NON-PRICE DETERMINANTS OF SUPPLY Pe -- expected price Pe in the future S today Pe in the future S today Pog -- price of other goods also produced by the same firm P soybeans S corn P soybeans S corn Pres -- price of resources worker's wages cost of making cars S cars Pres costs S Pres costs S Tech --technology Improved technology costs S Tax --taxes and subsidies Taxes costs S Taxes costs S Subsidies costs S Subsidies costs S N -- number of producers/sellers Nproducers S Nproducers S 3a Key Terms Key Terms Flash Cards - Click Here Key Terms: demand, quantity demanded, law of demand, market demand, horizontal summation, income effect, substituion effect, diminishing marginal utility, change in demand, change in quantity demanded, increase in demand, decrease in demand, non-price determinants of demand, normal good, inferior good, substitute good, complementary good (complement), independent goods 3a Practice Quiz (under construction) 3a Key Graphs Demand Schedule and Curve Change in Quantity Demanded Change in Demand: Increase Change in Demand: Decrease Market Demand 3a Review Videos - Demand and Supply Explained- Econ 2.1 [6:20 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 1: Economics and Globalization Lesson 3c: Market Equilibrium and Efficiency - So, what happens to Price and Quantity? 3c Introduction We are going to learn two very important things in this lesson. First, we will put demand and supply together and learn how to use the model to to see why products have the prices that they do. Then, and more importantly, we will see what causes prices to change. If you hear on the news or read in your news app, that the price of gasoline is going down, we will be able to explain WHY. The causes of changes in prices of products are the five non-price determinants of demand (Pe, Pog, I, Npot, T) and/or the six non-price determinants of supply (Pe, Pog, Pres, Tech, Tax, Nprod.). Whenever you hear that the price of something is changing think of which of these 11 possible causes have changed, draw the graph and shift the appropriate demand and/or supply graph, and the graph will show the price changing. Second, after we learn that in a competitive market economy the interaction of demand and supply will determine what the prices of products will be and how much people will buy at that price, we will ask: Is this the allocatively efficient quantity and price? Our goal is to show that in a competitive market the price will change until allocative efficiency is achieved. In chapter 2 we learned that markets are allocatively efficient. This means they will produce the quantity of goods that maximizes the society's satisfaction. After studying chapter 3 we will bew able to show the allocatively efficient price and quantity on a graph. Competitive markets are efficient. 3c Something Interesting - Why are we studying this? Read the first few paragraphs of Hybrid Car Prices Increasing Due To High Gas Prices. In lesson 3a you learned how the non-price determinants of demand (Pe, Pog, I, N, T) affect the demand curve. In lesson 3b you learned how the non-price determinants of supply (Pe, Pog, Pres, Tech, Tax, Nprod) affect the supply curve. After studying this lesson you will be able to use these determinants and graphs to explain why prices change. For example you will understand why: "It's becoming almost an annual tradition: As fuel prices rise in the spring, so do the prices of hybrid cars. " 3c Assignments: Readings Ch. 3 pp. 56-64, 69-74 Ch. 5: pp. 93-99, Efficiently Functioning Markets Supply, Demand, and Economic Efficiency Optional, but very useful Lecture Outline 3c Assignments: Video Lectures PUTTING SUPPLY AND DEMAND TOGETHER 2.3.1 Determining a Competitive Equilibrium 11:04 [MyNotes] 2.3.2 Defining Comparative Statics 7:02 [MyNotes] 2.3.3 Classifying Comparative Statics 11:54 [MyNotes] AC Micro 2.4 Double Shifts in Supply and Demand: Econ Concepts in 60 Seconds (2:34) EconMovies: Episode 4: Indiana Jones (Demand, Supply, Equilibrium, Shifts) (7:02) MARKETS AND EFFICIENCY Efficiency and Equilibrium in Competitive Markets (econclassroom.com 11:48) [begin at 7:27 and stop at 8:44, we will not cover consumer and producer surplus] [MyNotes] 3c Outcomes - What you should learn TOPICS Market Equilibrium Market Equilibrium and Changes in D and S Market Equilibrium and Allocative Efficiency Price Ceilings, Price Floors, and Allocative Efficiency OUTCOMES Market Equilibrium Explain the concept of equilibrium price and quantity.; define equilibrium; find the equilibrium price and quantity on a supply and demand schedule and graph Illustrate graphically equilibrium price and quantity. what happens if the price is below the equilibrium price? If it is above it? define "shortage" and "surplus" and explain using a supply and demand graph the four steps to finding a new equilibrium when a non-price determinant changes and how to use them (see the yellow pages) what happens to the equilibrium price and quantity if (1) demand increases, (2) demand decreases, (3) supply increases, and (4) supply decreases. Explain and graph the effects of simultaneous changes in demand and supply on equilibrium price and quantity Price ceilings, price floors, and allocative efficiency Markets and Efficiency define marginal social benefit and explain why it is often measured by the demand curve define marginal social cost and explain why it is often measured by the supply curve explain why allocative inefficiency occurs where MSB > MSC causing an underallocation of resources; show on graph using the MSB=MSC model explain why allocative inefficiency occurs where MSB < MSC causing an overallocation of resources; show on graph using the MSB=MSC model Explain how equilibrium achieves allocative efficiency. be able to find WHAT WE GET and WHAT WE WANT the MSB=MSC model graph 3a Non-Price Determinants of Demand and Supply Non-Price Determinants of Demand (PPINT) Pe -- expected price Pog -- price of other goods 1) substitute goods 2) complementary goods 3) independent goods I -- income 1) normal goods 2) inferior goods N -- number of POTENTIAL consumers T -- tastes and preferences Non-Price Determinants of Supply (PPPTTN) Pe -- expected price Pog -- price of other goods produced by same firm Pres -- price of resources T --technology T --taxes and subsidies N -- number of producers/sellers   NON-PRICE DETERMINANTS OF DEMAND Pe -- expected price Pe in the future D today Pe in the future D today Pog -- price of other goods 1) substitute goods P Maxwell House coffee D Folgers coffee P of one product D of its substitute 2) complementary goods P of wieners D of buns P of one product D of its compliment I -- income 1) normal goods Income D for normal goods Income D for normal goods 2) inferior goods Income D for inferior goods Income D for inferior goods Npot -- number of POTENTIAL consumers Npot D Npot D T -- tastes and preferences Tastes for a product D for that product Tastes for a product D for that product   NON-PRICE DETERMINANTS OF SUPPLY Pe -- expected price Pe in the future S today Pe in the future S today Pog -- price of other goods also produced by the same firm P soybeans S corn P soybeans S corn Pres -- price of resources worker's wages cost of making cars S cars Pres costs S Pres costs S Tech --technology Improved technology costs S Tax --taxes and subsidies Taxes costs S Taxes costs S Subsidies costs S Subsidies costs S N -- number of producers/sellers Nproducers S Nproducers S 3c Key Terms Key Terms Flash Cards - Click Here Key Terms: equilibrium, market equilibrium, bidding mechanism, surplus, shortage, scalping, productive efficiency, allocative efficiency, marginal social benefits, marginal social costs, "what we get", "what we want", profit maximizing quantity, underallocation of resources, overallocation of resources, price ceiling, price floor 3c Practice Quiz (under construction) 3c Key Graphs Market Equilibrium Changes in Demand And Supply Price Ceiling Price Floor 3c Review Videos  - Shifting Demand and Supply- Econ 2.3 [4:49 YouTube ACDC Leadership] - Double Shifts- Econ 2.5 (Technical Tuesday) [3:26 YouTube ACDC Leadership] - Price Ceilings and Floors- Economics 2.6 [4:34 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 1: Economics and Globalization Lesson 20a: Why we Trade: Comparative Advantage 20a Introduction In Lesson 2a we learned about the following Structural Adjustment Policies and the following characteristics of capitalist economies: Structural Adjustment Policies: - Privatization - Promotion of Competition - Reduced Role of Government - Removing Price Controls - Freer Trade and Convertible Currency - Foreign Investment Characteristics of Capitalist Economies: - private property - freedom of enterprise and choice - role of self interest - competition - - markets and prices - limited role for government In this lesson we will study trade.Trade increases competition and helps the world's economies achieve productive efficiency (producing at a minimum cost by using resources where they are best suited). Therefore it is an important concept to study in any introductory economics course. We will learn that trade based on COMPARATIVE ADVANTAGE can help the world PRODUCE MORE from the same amount of resources. Trade allows all countries to consume beyond their production possibilities (point E on the graph below). How is that possible? We will also learn that even if a country is better at producing all products, it is still possible for it to come out ahead if it specializes and trades with other (less productive) countries. How is that possible? That is why more and more countries are moving toward freer trade like the proposed Trans-Pacific Partnership trade agreement currently being discussed (see Lesson 20b). 20a Something Interesting - Why are we studying this? Read the first four paragraphs of The Mystical Power of Free Trade. After studying this lesson you should understand: - why "society benefits from allowing its citizens to buy what they wish--even from foreigners." (i.e. the gains from trade), - and why "people resist this conclusion, sometimes violently" 20a Assignments: Readings Chapter 20: pp 398-407 "The Mystical Power of Free Trade" http://www.cnn.com/ALLPOLITICS/time/1999/12/06/free.trade.html VERY USEFUL: Lecture Outline 20a Assignments: Video Lectures 1.5.1 Defining Comparative Advantage with the Production Possibilities Frontier 22:10 [MyNotes] 1.5.2 Understanding Why Specialization Increases Total Output 6:46 [MyNotes] 1.5.3 Analyzing International Trade Using Comparative Advantage 25:35 [MyNotes] 1.5.4 Outsourcing 8:54 [MyNotes] 17.4.3 Hot Topic: Winners and Losers in NAFTA 4:20 [MyNotes] OPTIONAL KA Comparative advantage specialization and gains from trade (8:55) EC Determining Comparative Advantage using PPCs – Worked solutions to AP Free Response Questions (8:27) 20a Outcomes - What you should learn TOPICS Why do we trade? Absolute Advantage, Comparative Advantage, and the Gains from Trade Terms of Trade OUTCOMES why do the gains from trade appear to be hidden from many people? what is the economic basis for specialization and exchange (trade)? calculate the opportunity costs using straight line production possibilities define and find absolute advantage and comparative advantage using straight line (constant costs) production possibilities calculate how specialization and trade increases output using the production possiblilities tables or graphs of two different countries (i.e. calculate the gains from trade) compute the minimum and maximum terms of trade 20a Key Terms Key Terms Flash Cards - Click Here Key Terms: opportunity cost, constant costs, increasing costs, absolute advantage, comparative advantage, gains from trade, free trade, terms of trade, minimum and maximum terms of trade 20a Practice Quiz (under construction) 20a Key Graphs Comparative Advantage and the Gains from Trade 20a Review Videos - Comparative advantage specialization and gains from trade | Microeconomics | Khan Academy [8:55 YouTube Khan Academy] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

 

Unit 1: Economics and Globalization Lesson 1a: 20b International Trade and Foreign Exchange Markets 20b Introduction Everything discussed in Lesson 20a about trade (specialization and exchange) can be applied to trade between individuals, cities, counties, states, and countries. In this lesson we will focus specifically on INTERNATIONAL trade (trade between countries). Comparative advantage still applies, but there are some differences between INTERnational trade (trade between countries) and INTRAnational trade (trade within a country). These differences include greater distances, politics, and the use of different currencies. Lesson 20b begins with a review of the FACTS of international trade (see: Lecture Outline). Then we will look at what happens when politicians restrict trade (and therefore cause inefficiency). And we will finish up with learning how to use a supply and demand graph to understand why exchange rates change. Concerning exchange rates: students often believe that a strong dollar is good and a weak dollar is bad. This is not always true. If the U.S. dollar appreciates (increases in value) it is often called a "strong dollar". What a strong dollar does is make it cheaper for Americans to buy foreign imports (or make it cheaper to take a ski trip in Canada). A strong dollar also makes it more expensive for foreigners to purchase U.S. exports. Therefore, a strong dollar may be good for consumers because of cheap imports, but bad for workers because of less exports, fewer jobs, and more unemployment). 20b Something Interesting - Why are we studying this? The link below goes to a LIST of articles on the Trans Pacific Partnership (TPP) trade agreement found on the Huffington Post news site. The Huffington Post tends to be a more liberal, and less free trade, news site. Scroll down just looking at the titiles of the news articles over the last few months. You will see that many of them appear to oppose the TPP trade agreement. Trans Pacific Partnership http://www.huffingtonpost.com/news/trans-pacific-partnership/ After studying this lesson you will have a better understanding of why many people oppose such trade agreements BUT most economists say that such agreements benefit the US economy and the world economy. 20b Assignments: Readings Textbook - Some Key Trade Facts pp. 398-400 - Trade Barriers and Export Subsidies, pp. 411-414 - The Case for Protection, pp. 414-416 - Multilateral Trade Agreements and Free-Trade Zones, pp. 416-418 - The Last Word - "Petition of the Candlemakers, 1845": p. 419 - Flexible Exchange Rates pp. 429-432; - Recent U.S. Trade Deficits pp.438-439 Trans-Pacific Partnership - http://www.nytimes.com/2015/05/12/business/unpacking-the-trans-pacific-partnership-trade-deal.html - http://www.nytimes.com/2015/06/13/upshot/what-you-should-know-about-the-trans-pacific-partnership.html - http://www.usnews.com/news/business/articles/2015/08/11/q-a-what-yuan-devaluation-means-for-china-other-countries VERY USEFUL: Lecture Outline 20b Assignments: Video Lectures 17.4.2 Trade Policy 7:17 [MyNotes] 17.1.1 Determining the Difference between a Closed Economy and an Open Economy 8:55 [MyNotes] Why do Countries Restrict Trade? (8:34) [MyNotes] Types of Trade Restrictions (9:43) [MyNotes] 17.1.2 Understanding Exports in an Open Economy 5:22 [MyNotes] 17.3.1 Nominal Exchange Rates 11:32 [MyNotes] 17.3.4 Determination of Exchange Rates 12:31 [MyNotes] 17.3.5 Floating and Fixed Systems 13:18 [MyNotes] 20b Outcomes - What you should learn TOPICS Facts About Trade Trade Restrictions Exchange Rates Trade Deficits OUTCOMES summarize the importance of international trade to the U.S. in terms of overall volume and major trading partners. list the major imports and exports of the United States and identify the major its major trading partners identify types of trade barriers describe the economic impact of tariffs, including both direct and indirect effects. contrast the economic impact of a quota with that of a tariff. list six arguments in favor of protectionist barriers, and critically evaluate each who gains from trade restrictions? who loses? the two most popular arguments against free trade are (1) we need to restrict trade to crease more jobs here, and (2) how can our workers compete against workers who are paid only a few dollars a day? Why do these two argments make NO ECONOMIC SENSE? why are import quotas more restrictive than tarriffs? identify the costs of protectionist policies and their effects on income distribution. understand the benefits and problems of a "strong dollar" and a "weak dollar" what causes exchange rates to appreciate and depreciate? understand the causes and effects of trade deficits 20b Key Terms Key Terms Flash Cards - Click Here Key Terms: imports, exports, trade barriers, tariff, revenue tariff, protective tariff, import quota, nontariff barrier, export subsidies, special interest effect, infant industry, dumping, WTO, NAFTA, TPP, offshoring, exchange rate, strong dollar, weak dollar, appreciation, depreciation, trade deficit, trade surplus 20b Practice Quiz (under construction) 20b Key Graphs Graph used to show the effects of a tariff (trade restriction): Exchange Rates: 20b Review Videos - Episode 35: Why do countries restrict trade? [8:34 YouTube mjmfoodie] - Foreign Exchange (FOREX)- Macro 5.2 [8:34 YouTube ACDC Leadership ] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 2: Introduction to Macroeconomics Lesson 12b: The AD/AS Model - AS and Equilibrium in the Macro-Economy (UE, IN, EG) 12b Introduction Almost everyday we can find news about unemployment (UE), inflation (IN), and economic growth (EG). People discuss these issues over coffee and presidential candidates discuss them during debates. Our elected leaders consider them in pieces of legislation. How can we gain a better understanding of the causes of unemployment, inflation, and economic growth so that we can better understand these discussions? To economists the answer is the Aggregate Demand / Aggregate Supply model of the macroeconomy. In this lesson we will add aggregate supply to our aggregate demand graph (lesson 12a) and use the combined graphs to find the equilibrium level of real GDP (output) and price level. We will see what causes the equilibrium level of real GDP (output) and price level of an economy to change (the determinants of AD and AS), and we will use such changes to gain a better understanding of the causes of UE, IN, and EG. So the next time you hear a politician discuss what they plan to do about UE, IN, and EG, you will have a much better understanding of what the are saying. 12b Something Interesting - Why are we studying this? Low oil prices boost economic growth: "Sinking prices have implications for economies across the globe. Important oil exporters, such as the OPEC countries, bear the brunt of negative impacts, while oil importers benefit. Overall economic activity in the U.S. will benefit, although lower oil prices will depress activity in many producing states, such as Texas and North Dakota..... Depending on which economic model is used, a 50 percent oil price decline yields a 0.3 to 1 percent increase in U.S. GDP. The traditional rule of thumb has been that a sustained 50 percent lower crude oil price raises the growth rate by about 1 percentage point. However, since the U.S. produces more oil and uses it more efficiently nowadays, the traditional rule of thumb should probably be halved—the reduction should boost U.S. growth 0.5 percentage point for a year or so." From: Dallas Fed Vol. 10 No. 3, April 2015, "Economic Letter - Plunging Oil Prices: A Boost for the U.S. Economy, a Jolt for Texas" by Anthony Murphy, Michael Plante and Mine Yücel https://www.dallasfed.org/assets/documents/research/eclett/2015/el1503.pdf After this lesson you should be able to use an AS/AD graph to illustrate the effects of low oil prices on the US economy and use the graph to explan what should happen to UE, IN, and EG. 12b Assignments: Readings Chapter 12 - Aggregate Supply and Aggregate Demand 238-250 Ch. 9: Types of Inflation: pp. 179-180 Review Ch. 1: "Present Choices, Future Possibilities": pp. 16-18 Lecture Outline 12b Assignments: Video Lectures AGGREGATE SUPPLY 14.2.1 The Short-Run Aggregate Supply Curve 9:03 [MyNotes] 14.2.2 The Labor Market 7:20 [MyNotes] EQUILIBRIUM 14.3.2 Equilibrium in the Short Run 12:10 [MyNotes] 14.3.7 Hot Topic: Oil Shocks 4:52 [MyNotes] 12b Outcomes - What you should learn TOPICS Aggregate Supply (AS) and its Determinants Macroeconomic Equilibrium Changes in AD and what happens to UE, IN, and EG Changes in AS and what happens to UE, IN, and EG Changes in both AD and AS and what happens to UE, IN, and EG OUTCOMES Define, draw, and describe the shape of the immediate short-run, short-run, and long-run AS curves, and understand the determinants of the short-run AS curve [Define, Draw, Describe, Determinants] Find an economy's equilibrium price level and real domestic output using AD/AS graph Explain using an AD/AS graph what happens to RDO, the price level, UE, IN, and EG when there is a change in AD and/or AS. Explain the ratchet effect and demand pull inflation Explain cost-push inflation and stagflation Two (or three) definitions of economic growth  IN THE NEWS -Use the AS/AD model to explain what might happen to UE, IN, and EG following these events in the news: 2003: "the recently-signed tax-cut plan, which will give rebate checks to families with children in late summer, right in time for back-to-school spending" 2003: "improving consumer confidence -- critical, since consumer spending makes up more than two-thirds of the economy" 2003: "The Commerce Department's report last week of a surprising August improvement in the international trade balance " 2009: "Personal spending jumped 1.3% last month, the government said." 2011: "With energy prices already well on the rise before the latest crisis hit the Middle East and North Africa, is the global economy headed for another tumble?" How can an economy go beyond the full employment level of output? 12a Determinants of AD and AS   DETERMNANTS of AD __________ AD__________ __________ AD___________ C AD C AD I AD I AD G AD G AD Xn AD Xn AD MS Int. Rt. I AD MS Int. Rt. I AD T C AD T C AD S C AD S C AD DETERMNANTS of AD Consumption (C) C AD C AD Investment (I) I AD I AD Government Purchases (G) G AD G AD Net Exports (Xn) Xn AD Xn AD Money Supply (MS) MS Interest Rates I AD MS Interest Rates I AD Taxes (T) T C AD T C AD Saving (S) S C AD S C AD   DETERMINANTS of AD C = consumer spending (and saving) 1. consumer wealth Wealth C AD Wealth C AD 2. consumer expectations Expected future Income C today AD today Expected future Income C today AD today 3. consumer indebtedness Consumer Debt C AD Consumer Debt C AD 4. taxes T C AD T C AD I = investment spending 1. interest rates (money supply) MS Interest Rates I AD (memorize this) MS Interest Rates I AD 2. profit expectations on investment projects profit expectations I AD profit expectations I AD 3. business taxes Business Taxes I AD Business Taxes I AD 4. technology technology improves I AD 5. degree of excess capacity excess (unused) plant capacity I AD excess (unused) plant capacity I AD G = government purchases (no determinants) Xn = net export spending 1. net income abroad Income in Foreign Countries Xn AD Income in Foreign Countries Xn AD 2. exchange rates value of the US dollar Xn AD value of the US dollar Xn AD   Determinants of AS __________ AS__________ __________ AS__________ price of resources AS price of resources AS productivity AS productivity AS business taxes and gov't red tape AS business taxes and gov't red tape AS DETERMINANTS OF AS Price of Resources price of resources AS price of resources AS Productivity of Resources productivity AS productivity AS Business Taxes and Gov't Regulations business taxes and gov't red tape A S business taxes and gov't red tape AS 12b Key Terms Key Terms Flash Cards - Click Here Key Terms: AS, immediate-short-run AS, short-run AS, long-run AS, Keynesian range, Intermediate range, Classical range, equilibrium price level, equilibrium real output (RDO), demand-pull inflation, cost-push inflation, efficiency wages, ratchet effect, stagflation, OPEC 12b Practice Quiz (under construction) 12b Formulas GDP = C + I + G + Xn 12b Key Graphs Aggregate (AS) Supply Increase in AS / Decrease in AS Macroeconomic Equilibrium Change (Increase) in AD Change (Increase) in AS 12b Review Videos - Macro 3.2- Aggregate Supply Practice [2:10 YouTube ACDC Leadership] - Macro 3.3- Long Run Aggregate Supply, Recession, and Inflation (LRAS) [Beginning to 1:50 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

 

Unit 2: Introduction to Macroeconomics Lesson 9a: Unemployment (UE) 9a Introduction Most economists will say that the U.S. economy achieves full employment at an UE rate of about 5%. Five percent unemployment in the U.S. is about eight million people unemployed and THAT is called full employment. How can 8 million unemployed people be called "full employment"? How is the unemployment rate calculated? Who is employed? Who is unemployed? What is "full" employment? What is "unemployment"? We will try to understand the answers to these questions by returning to the 5Es of economics from lesson 1b. We learned there that the 5 Es were five ways to reduce scarcity and achieve the maximum level of satisfaction for a society. In the U.S. we can produce the maximum amount of output when there is about 5% unemployment. Confusing? Yes. It should be - - - now, but after studing this lesson it will be much more clear. 9a Something Interesting - Why are we studying this? 205,000 jobs created in March, 2016, but the unemployment rate increases. WHY?. "The American economy continues its march upward. The monthly jobs report released Friday by the Bureau of Labor Statistics showed that the economy created 215,000 jobs in March, slightly higher than the 205,000 expected. The unemployment rate ticked up to 5 percent from 4.9 percent. U.S. job growth has continued for a record 73 months in a row." The Huffington Post 04/01/2016 09:58 am ET. How can there be both more jobs and more unemployment ? This news article linked below also says: "the increase in the unemployment rate is actually a good thing". How can that be? Read the first five paragraphs of the article linked below to find out. http://www.huffingtonpost.com/entry/march-jobs-report_us_56fe6c5de4b0a06d58056916 Most economists will say that when the U.S. economy achieves an UE rate of about 5%, then we have achieved full employment. Five percent unemployment in the U.S. is about eight million people unemployed and THAT is full employment. How can that be? Who is counted when they calculate the unemployment rate? And who is not counted? Watch the short YouTube video linked below. The Unemployment Game Show: Are You *Really* Unemployed? from Mint.com 2:10 9a Assignments: Readings Chapter 9: pp. 173-179 Ch. 7: "GDP Price Index," pp. 141-142 Unemployment Rate in the United States Lecture Outline 9a Assignments: Video Lectures 11.2.1 Measuring the Labor Force and Unemployment 5:48 [MyNotes] The Unemployment Game Show: Are You *Really* Unemployed? from Mint.com 2:10 11.2.2 Types of Unemployment 4:18 [MyNotes] 11.3.1 Understanding the Natural Rate of Unemployment 4:05 [MyNotes] 9a Outcomes - What you should learn TOPICS What is Unemployment? Who is included and who is not? The Unemployment Rate and the "Real" Rate of Unemployment What is Full Employment and the Types of Unemployment? The Natural Rate of Unemployment Changes in the Natural Rate of Unemployment The Costs of Unemployment OUTCOMES What is unemployment? Describe how unemployment is measured. How is the unemployment rate calculated? Who is included as employed, unemployed, and who is not in the labor force? Why might UE increase as an economy is beginning to recover from a recession? Define the "Real Rate of UE". What is full employment? Identify the full employment, or natural rate, of unemployment and explain why 5% unemploymnent can be called full employment. Define and give examples of frictional, cyclical, and structural unemployment. How and why has the natural rate of unemployment changed over the past five or six decades? Why might UE increase as an economy is beginning to recover? Jan. 2015: US population 320,090,000; US labor force 157,180,000 Sept. 2015: US population 321,650,000; US labor force 156,715,000 How can the size of the labor force decline as the size of the population increases? Identify the economic costs of unemployment and the groups that bear unusually heavy unemployment burdens. What is a positive GDP gap and a negative GDP gap? 9a Key Terms Key Terms Flash Cards - Click Here Key Terms: unemployment rate, unemployed, employed, labor force, underemployed, discouraged worker, "natural rate of UE" or "full employment rate of UE", "real rate of UE", frictional UE, structural UE, cyclical UE, potential output, GDP gap, labor force participation rate 9a Practice Quiz (under construction) 9a Formulas Unemployment Rate = (# UE / # labor force) x 100 9a Key Graphs Point D represents unemployment (or productive inefficiency) AS/AD Graph representing an economy with unemployment 9a Review Videos - Macro 2.3- Unemployment and Natural Rate of Unemployment- AP Macro [1:54 YouTube ACDC Leadership] - Unemployment Game Show - Are you Officially Unemployed? [2:09 YouTube Mint.com] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 2: Introduction to Macroeconomics Lesson 9b: Inflation (IN) 9b Introduction The THREE ISSUES of Macroeconomics are: UE, IN, and EG. In chapter 12 we learned a tool (the AS/AD model) that helped us understand what causes UE, IN, and EG. Chapter 9 discusses the issues of UE and IN in greater detail. And in chapters 7, 8 and 22W we study EG. We have already learned two causes of inflation (lesson 12b), demand-pull and cost-push inflation, but we really did not define inflation. Inflation (IN) is the rate of increase in the price level, i.e. how fast it is increasing. Here we will learn how the price level is measured by using a price index, how inflation is calculated, and the economic effects of inflation. 9b Something Interesting - Why are we studying this? Read the short 2013 news article below about the effects of inflation on the minimum wage. The Real Minimum Wage Falls Every Year — Here's How To Fix That After reading the article you should be wondering "What causes inflation and what can be done about it?". After studying this lesson you should have a better answer to that question. OPTIONAL, but interesting: http://www.huffingtonpost.com/2013/02/13/minimum-wage-productivity_n_2680639.html 9b Assignments: Readings Chapter 9: pp. 179-187 p. 247 "disinflation" at the bottom of the first column Ch. 7: "GDP Price Index," pp. 141-142 Ch. 14: "Money and Prices" and "Stabilizing Money's Purchasing Power", pp. 285-286 Lecture Outline 9b Assignments: Video Lectures 11.5.1 Inflation, Deflation, Stagflation, and Hyperinflation 4:54 [MyNotes] 10.3.1 Changes in the Cost of Living and the CPI 4:47 [MyNotes] 10.3.2 Calculating the Rate of Inflation 7:33 [MyNotes] 10.3.3 Comparing the CPI and the GDP Deflator 6:02 [MyNotes] 11.5.2 Inflation and Purchasing Power 7:45 [MyNotes] 11.5.3 Short-Run Causes: Demand-Pull and Cost-Push Inflation 9:59 [MyNotes] 11.5.5 The Costs of Inflation 9:23 [MyNotes] 11.5.6 Case Study: Behavior during Hyperinflation 6:14 [MyNotes] 9b Outcomes - What you should learn TOPICS Definition of Inflation What is an Index? Calculate the Inflation Rate using an Index Causes and Effects of Inflation Costs of Inflation OUTCOMES Define inflation, deflation, and disinflation Calculate the inflation rate using price index data What is a price index and how is the CPI measured? Explain the two types of inflation (demand-pull; cost-push) using the AD/AS graph What is the rule of 70 and apply it to the price level. If the population of a country is 25 million and it is growing a rate of 4% a year, how many years will it take for the population to reach 50 million? 100 million? 200 million (assuming that the growth rate stays at 4%)? Who is hurt by unanticipated nflation and who may benefit from unanticipated inflation. (redistributive effects of inflation). What are the output and employment effects of demand-pull and cost-push inflation? (Who is hurt and who is helped?) How does the inflation rate affect real income growth? Recently a teachers' union argued that the standard of living of teachers working for the school district was falling. The negotiating team for the school board replied that this was not true because the teachers had received significant increases in nominal income through collective bargaining. Could the union statement be correct? If inflation is going down then what is happening to the average level of prices in an economy. OR what is the difference between deflation and disinflation? 9b Key Terms Key Terms Flash Cards - Click Here Key Terms: inflation, inflation rate, deflation, disinflation, price index, CPI, purchasing power, rule of 70, cost-push inflation, demand-pull inflation, redistributive effects, output effects, hyperinflation, nominal income, real income, COLAs, menu costs 9b Practice Quiz (under construction) 9b Formulas To measure inflation, subtract last year's price index from this year's price index and divide by last year's index; then multiply by 100 to express as a percentage. Inflation Rate = [ (Price Index this year - Price Index last year) / Price Index last year ] x 100 IN rate 2015 = [ (PI 2015 - PI 2014) / PI 2014 ] x 100 9b Key Graphs Demand-Pull Inflation Cost-Push Inflation 9b Review Videos - Inflation- Cost-push & Demand-pull- Macro 3.6 [5:35 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 2: Introduction to Macroeconomics Lesson 7a: Measuring the Economy - GDP 7a Introduction Now we begin a three chapter (7, 8, and 22W) discussion of economic growth (EG). Defining EG can be a little complicated and we will study that in the next chapter, but EG usually means "an increase in real domestic output (RDO)". In chapter 7 we learn how real domestic output (RDO) is measured. We have been using the AS/AD model for several lessons now but we do not know what numbers actually go on the axes of the graph. What numbers do we use to measure RDO on the horizontal axis of the AS/AD graph.? Well, we use real GDP to measure RDO and here we learn how it is calculated. In lesson 9b we learned how a price index (CPI or GDP Index) measures the price level. We use price index numbers on the vertical axis of the AS/AD graph. 7a Something Interesting - Why are we studying this? Watch this short four minute video from MRuniversity.com Basic Facts of Wealth But how is GDP measured? Study this lesson to find out. 7a Assignments: Readings Chapter 7 - ALL  Lecture Outline 7a Assignments: Video Lectures AGGREGATE OUTPUT AND INCOME REVIEW (1d): 10.1.1 The Production Possibilities Frontier: Macroeconomic Applications 18:18 [MyNotes] REVIEW (2a): 10.1.2 The Circular Flow Model 9:38 [MyNotes] 10.1.3 Real GDP 12:01 [MyNotes] 10.1.4 The BEA Procedure for Calculating Real GDP 8:15 [MyNotes] 10.1.5 Limitations of GDP and Alternative Indexes 4:51 [MyNotes] APPROACHES TO CALCULATING GDP 10.2.1 The Expenditures Approach 4:54 [MyNotes] 10.2.2 The Income Approach 7:02 [MyNotes] EconMovies- Episode 6: Back to the Future (Nominal vs. Real, Unemployment, Inflation) (6:29) 7a Outcomes - What you should learn TOPICS Define GDP Problems (Shortcomings) with using GDP as a Measure of Social Welfare Define and Calculate GDP National Income (NI) NDP net investment (Xn) net exports (Xn) real GDP Define Personal Income and Disposable Income OUTCOMES Use a circular flow diagram to show the two ways of calculating GDP Define and calculate GDP and NI when given national income data. Define and give examples of final goods, intermediate goods, and double counting. Differentiate between gross and net investment. Define Investment and state what is included. Explain why changes in inventories are investments. Calculate net investment and explain how it indicates a growing, static, or declining economy. Explain why imports are subtracted to calculate GDP List and explain the shortcomings of using GDP as a measure of social welfare. India's GDP is much greater than is Switzerland's GDP yet Switzerland has a higher standard of living. Explain. After a major natural disaster (flood, tornado, earthquake) GDP often increases. Is GDP in this case a good indicator of social welfare? Explain. Find real GDP by adjusting nominal GDP with use of a price index (GDP price index, also called the GDP deflator) and be able to find the years of recessions given nominal GDP data. 7a Key Terms Key Terms Flash Cards - Click Here Key Terms: Gross Domestic Product (GDP), intermediate goods, final goods, double counting (multiple counting), non-market transactions, underground economy, GDP per capita, expenditures approach, income approach, national income (NI), proprietor's income, personal income (PI), disposable income (DI), nominal GDP, real GDP, gross private domestic investment, net private domestic investment, net domestic product (NDP), net exports 7a Practice Quiz (under construction) 7a Formulas GDP = C + Ig + G + Xn NI = wages + rents + interest + corporate profits + proprietor's income NDP = C + In + G + Xn NDP = GDP - depreciation In = Ig - depreciation Xn = X - M real GDP = (nominal GDP / price index) x 100 7a Key Graphs Circular Flow Model 7a Review Videos - Macro Unit 2.1- GDP and Economic Growth [3:37 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 2: Introduction to Macroeconomics Lesson 8a: Economic Growth (EG) 8a Introduction In chapter 8 the textbook says that there are TWO DEFINITIONS of EG, but in chapter 1 (Lessons 1b and 1c) we learned another definition. So actually there are THREE DEFINITIONS of EG. I believe the best way of understanding the difference between them is to discuss whether the growth is ACHIEVING THE POTENTIAL of the economy or INCREASING THE POTENTIAL of the economy. Both of these increase RDO (real domestic output) and it is an increase in RDO that is the COMMON DEFINITION of EG. But this everyday definition of economic growth, the one you hear on the news broadcasts, doesn't tell us if the economy is achieving its potential by producing more OR whether the economy is has increased it potential and therefore is ABLE to produce more. Why is this distinction important? Why do we care? Well, there are different CAUSES and POLICIES for each approach to growth and both approaches increase output and therefore reduce scarcity and increase society's satisfaction. As we should remember from lesson 1b, reducing scarcity and increasing society's satisfaction is the goal of economics. 8a Something Interesting - Why are we studying this? The economic growth that we are used to, 1%, 2,% 3%, 4%, maybe even, 7%, 8% or even 9% a year, is a recent phenomonon in the history of the world. Prior to the beginning of the 17th century, (arouind 1800) all parts of the world had similar living standards and these living standards had not changed much for thousands of years. See graph below. Now we expect long term economic growth and livuing standards in different parts of the world very significantly. Why? We will study this and other econmic growth issues in this lesson. 8a Assignments: Readings Chapter 8 - ALL Ch. 1 "A Growing Economy" and "Present Choices and Future Possibilities", pp. 15-18 Lecture Outline 8a Assignments: Video Lectures 16.1.2 The PPF, the AD/AS Model, and Long-Run Growth 7:44 [MyNotes] 16.1.3 The Production Function and Growth 6:49 [MyNotes] 16.1.4 The Definition of Productivity and Factors Affecting It 3:54 [MyNotes] 8a Outcomes - What you should learn TOPICS Definitions of EG EG in the US Modern EG Determinants of EG Causes of Productivity Growth OUTCOMES Give three definitions of economic growth and illustrate them on the 5Es, PPC, AS/AD, and LRAS models. Use the 5Es, PPC, AS/AD, and LRAS models to differenciate between "achieving our potential" and "increasing our potential". Explain why growth is a desirable goal. Define “modern economic growth” , "great divergence", "leading country", and "follower country". Identify two main sources of growth (more resources, more productivity) and apply them to the growth history of the United States. Explain and apply the "rule of 70." Identify and explain the supply factors (INCREASING the potential) Identify and explain the demand, and efficiency factors (ACHIEVING the potential) Differentiate between ACHIEVING the potential and INCREASING the potential using the PPC. AD/AD, and long-run AS models According to the authors, why is the real GDP per capita of the United States in 2007 so much higher than that of other rich countries? Differentiate between production, productive efficiency, and productivity If the quantity of labor increases, what happens to productivity? ANSWER: Nothing. The quantity of labor will affect production, but the quality of labor affects productivity What are the determinants of productivity growth? Identify and explain the arguments for and against economic growth. 8a Key Terms Key Terms Flash Cards - Click Here Key Terms: economic growth, increasing the potential, achieving the potential, GDP per capita, rule of 70, productivity, production, productive efficiency, modern economic growth, the great divergence, leader countries, follower countries, property rights, patents and copyrights, simultaneous consumption, network effects, labor force participation, infrastructure, human capital, economies of scale 8a Practice Quiz (under construction) 8a Formulas GDP per capita = GDP / population 8a Key Graphs Modern Economic Growth Economic Growth and the 5Es: Economic Growth is "Increasing the Potential" Prod. Eff. and Full Emp[loyment is "Achieving the Potential.   EG - INCREASING THE POTENTIAL   EG - ACHIEVING THE POTENTIAL   EG - ACHIEVING THE POTENTIAL   EG - INCREASING THE POTENTIAL EG - INCREASING THE POTENTIAL 8a Review Videos - Economic Growth and LRAS- Macro 3.14 [2:58 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 2: Introduction to Macroeconomics Lesson 22Wa: Economic Growth in the Less Developed Countries (LDCs) 22Wa Introduction From the United Nations: - 925 million people do not have enough to eat - more than the combined populations of the USA, Canada, and the European Union; (Source: FAO news release, 14 September 2010) - Nearly half the world’s population, 2.8 billion people, survive on less than $2 a day. - About 20 percent of the world’s population, 1.2 billion people, live on less than $1 a day. - Nearly 1 billion people are illiterate and 1 billion do not have safe water. - 98 percent of the world's hungry live in developing countries; (Source: FAO news release, 2010) Source: http://www.un.org/en/globalissues/briefingpapers/food/vitalstats.shtml I believe that no discussion of EG is complete without a discussion of the world's poor where EG means more than getting a new car or another vacation -- it is a matter of life and death. A discussion of the world's less developed countries also allows us to return to the subject of STRUCTURAL ADJUSTMENT (globalization) that we studied in unit 1. This would be a good time to review your notes from lesson 2a. Because of the economic growth that has resulted from Structural Adjustment in the past few decades, millions of people in the less developed countries have been lifted out of poverty. The figure below shows the great decline in the number of people living on $1.25 a day or less since 1990. 22Wa Something Interesting - Why are we studying this?   "The 85 richest people on Earth now have the same amount of wealth as the bottom half of the global population, according to a report released Monday by the British humanitarian group Oxfam International." From: Oxfam report highlights widening income gap between rich, poor 85 people's wealth = 3,500,000,000 people's wealth. And, the gap between the rich and the poor is widening. Think about it. In this lesson we will begin to understand why. 22Wa Assignments: Readings Chapter 22W - ALL - found at: Chapter 22w Also read: Measures of EconomicDevelopment Study these maps before class Oxfam report highlights widening income gap between rich, poor Lecture Outline 22Wa Assignments: Video Lectures 16.3.1 Growth in Emerging Economies 10:23 [MyNotes] 10.1.6 The Growth of China as a Superpower 2:14 [MyNotes] 16.3.2 Policies to Promote Growth 7:50 [MyNotes] 16.2.2 Other Policies to Encourage Growth 10:40 [MyNotes] 16.3.3 Hot Topic: The Myth of Exploding Populations 8:00 [MyNotes] 16.2.3 Hot Topic: Women's Roles in Rural Economic Growth 4:59 [MyNotes] 22Wa Outcomes - What you should learn TOPICS The International Distribution of Income Characteristics of the LDCS (DVCs) Obstacles to Development and the Role of Government OUTCOMES Identify various terms that are used to name the rich and poor countries, including the "global south" and have a general understanding of where thay are on a world map. Where do most of the world's people live? Why does Africa look so small on many maps? Describe the world distribution of wealth What is the "vicious cycle" and how does population growth affect it? How is the level of saving related to the level of investment and productivity in the cycle of poverty? How is the level of saving related to the level of investment and productivity in the cycle of poverty? Identify the characteristics of DVCs. How does population growth affect the growth in GDP per capita? Where did Maltus go wrong? Define and give examples of the primary, secondary, and tertiary sectors of an economy List some of the obstacles to economic development. Discuss the role of the DVC government in promoting economic development within their country Describe how IACs can help low-income countries including the trade vs. aid debate How can agricultural subsidies in the IACs (MDCs) negatively affect economic growth in the DVCs (LDCs)? Describe the growth rates of IACs and DVCs and the growing absolute income gap between rich and poor countries. 22Wa Key Terms Key Terms Flash Cards - Click Here Key Terms: LDCs (DVCs), MDCs (IACs), global south, primary activities, secondary activities, tertiary activities, vicious circle of poverty, brain drain, land reform, microfinance and Grameen Bank, World Bank, foreign direct investment, GDP per capita, capital flight, supply chain, Malthus, green revolution, financial intermediary 22Wa Practice Quiz (under construction) 22Wa Key Graphs / Figures Income per capita: Low, Middle, and High Income Countries   The True Size of the Continents (yellow) and the Size Seen on Many Maps (black outline) 22Wa Review Videos - Economic Growth in the Less Developed Countries [9:45 YouTube Brad Cartwright Economics] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.

Unit 3: Macroeconomic Policy Lesson 14a: Monetary Policy - Money, The Money Market Model, and the Fed 14a Introduction  We now begin unit 3 where we focus on macroeconomic POLICY. When we say "policy" we mean "government". What can the government do to achieve the three macroeconomic goals of low UE, low IN, and rapid EG? In lesson 12c we introduced stabilization policies: monetary policy and fiscal policy. (This would be a good time to review your notes on lesson 12c.) Here, we will dig deeper, beginning with Monetary Policy (MP). In lesson 12 c we learned that if UE is high we can increase the money supply (MS) which will cause interest rates to go down. We called this an "Easy Money Policy". Lower interest rates will increase investment (I) and therefore increase aggregate demand (AD). When AD increases it will increase real domestic output (RDO or real GDP) and decrease UE. But, it may increase the price level (PL) and therefore increase inflation.   Easy (Expansionary) MP:   Tight (Contractionary) MP: We begin monetary policy in lesson 14a by defining money (what is money?) and the money supply (MS). Then we will develop the model of the money market that we will use in the next three chapters to show how monetary policy works. We finish the lesson with a discussion of the structure of the Federal Reserve (the Fed). As we know from lesson 12a the Fed controls the money supply (MS). Here we learn that "the Fed" is NOT the federal government in Washington DC. The policy making arm of the Fed is basically the Federal Open Market Committee (FOMC) comprised of 12 people and these 12 people have the power to raise interest rates and put millions of people of work as they did in the early 1980s. Or, the FOMC can lower interest rates causing millions of people to earn less on their financial investments. The chairperson of the Fed (Janet Yellen in 2016) has been called "the second most powerful person in the United States". In this unit we will learn why. 14a Something Interesting - Why are we studying this? Listen or read the link below. Planet Money Episode 421: The Birth Of The Dollar Bill (10:37). Before the Civil War, there were 8,000 different kinds of money in the United States. Banks printed their own paper money. And, unlike today, a $1 bill wasn't always worth $1. Sometimes people took the bills at face value. Sometimes they accepted them at a discount (a $1 bill might only be worth 90 cents, say). Sometimes people rejected certain bills altogether. Pictures of early money: Pre-Civil War Bank Note Lincoln Greenback So, WHAT IS MONEY? Study this lesson for the answer. 14a Assignments: Readings Chapter 14: ALL Chapter 16: Interest Rates (pp. 315-317) and Cause-Effect Chain (pp. 329-330) Read Paper 3 Instructions and start looking for your news article Planet Money Episode 421: The Birth Of The Dollar Bill (10:37). Audio only. Interesting radio story on early money in the US. Pictures of early money: - Pre-Civil War Bank Note - Lincoln Greenback Lecture Outline 14a Assignments: Video Lectures 13.1.1 The Money Supply 8:10 [MyNotes] 13.4.2 Case Study: Cigarettes As Money 6:07 [MyNotes] 13.1.2 Determinants of Money Demand 9:00 [MyNotes] 13.1.3 The Money Market 10:02 [MyNotes] Money Market - Macro Review 3:24 [YouTube ACDCLeadership] 13.3.1 The Federal Reserve System 8:13 [MyNotes] 14a Outcomes - What you should learn TOPICS What is Money? The Money Market Model: MD and MS The Structutre and Functions of the Federal Reserve and Banking Systems OUTCOMES Why is money important? Why do we use money? Why do we care about money? What is wrong with barter? What is money? How can cigarettes or beer be money? List and explain the three functions of money. State three reasons why currency and checkable deposits are money and why they have value. Define the money supply M1 and near monies M2. Identify two types of demand for money and the main determinant of each. The money market graph: explain what is meant by equilibrium in the money market and the equilibrium rate of interest; what happens when there is a change in the money supply? What causes interest rates to change? Describe the structure of the U.S. banking system. Explain why Federal Reserve Banks are central banks, quasi public banks, and bankers' banks. Describe seven functions of the Federal Reserve System and point out which role is the most important. 14a Key Terms Key Terms Flash Cards - Click Here Key Terms: barter, coincidence of wants, money, medium of exchange, unit of account, store of value, commodity money, near money, liquidity, M1, M2, money supply (MS), federal reserve notes, checkable deposits, money demand (total money demand), transactions demand, asset demand, money market model, Federal Reserve System, Board of Governors, FOMC 14a Practice Quiz (under construction) 14a Key Graphs Money Demand - D1 is Transactions Demand - D2 is Asset Demand  Money Market Increase in the Money Supply Decrease in the Money Supply 14a Review Videos - Macro 4.2- Functions of Money [2:01 YouTube ACDC Leadership] - The Money Market- Macroeconomics 4.6 [3:24 YouTube ACDC Leadership] - Macro 4.5- The Federal Reserve System- Quick Overview [1:59 YouTube ACDC Leadership] NOTE: These are REVIEW videos only. In order to learn the material you must read the assigned textbook readings, watch the assigned lecture videos, and do problems. See the LESSONS link on Blackboard for these assignments.