Second HW 7-19

1. Analyze fiscal and monetary policies from the demand-side effects. 2. Analyze fiscal and monetary policies from the supply-side effects. 3. Evaluate the impact of government deficits and debt. 4. Differentiate between demand-pull and cost-push inflation.

1. Analyze the role of investment in human capital formation. 2. Analyze the role of investment in physical capital formation. 3. Demonstrate the role of investment in research and development, and technological progress. 4. Illustrate how public policies influence the long-run economic growth of economy.

K- fiscal policy is the government collection of revenue. With no fiscal policy, there is no money. Money and fiscal policy go together very important.

W- I want to know more about fiscal policy and how to collect government collection money.

L- I learned fiscal policy is very important and most governments have strong fiscal policy.

S- ?

FIRST 7-19 HW

. Be able to explain how money is created, Pages 333-3361. Be able to compare the tools of the Federal Reserve System, Pages 349-362

2. Be able to compare and contrast economic theories: Keynesian, Monetarism, Rational expectations, and supply Side Economics (and the Laffer Curve) Topic # 17, Pages 237-241; 230-235; 381-382 and 286-287

3. Be able to discuss the historical perspective of inflation and unemployment in relation to Phillips curve and stagflation Pages 377-380 and 382-383

K- I know money is created in the form of paper. The amount of gold and silver we have in the banks is the amount of money we can receive.

W- How to make more money and how to make money for myself.

L- money is made in banks and money is the key hold for trading.

ECO HW 7-12

Using a KWL-S chart, state under the letter K all you know about the impact of economic fluctuations on the economy’s real output and price level in both the short run and long run. Under the letter W, think up questions to show what you want to know about the specific learning objective. After reading the assigned pages state what you learned. Finally, if you still have questions unanswered; write these questions under the letter S.

Repeat the KWL-S method for the #s 2-4 specific learning objectives.

1.      K-I unfortunately do not know much about the impact of economic fluctuations on the economy’s real output and price level in both the short run and the long run. What I can predict however is the price level in the short run of a good or services is always important. If the price level is too high, consumers will not buy from the producers. If the price is too low, the consumers will be happy, but the producers will not make profit.

2.      W- What would happen to the economy if short and long run effects never came into effect? How long do recessions last, what can we do to avoid getting into a new one? Why are the four components to GDP so important? Is there a way we can keep the economy always up flourishing with money?

3.      L- GDP has four components. The federal government knows exactly when the economy will go into a recession. Recession isn’t necessarily always a bad thing, some business use it as a thinking period and time to think whether to reduce production, cut prices, close stores, or other facilities, or lay off workers. Each business cycle is different, not one is the same, ever.

4.      S- I understand everything from the reading perfectly. Self-explanatory, the material makes a lot of sense. It does not leave you confused at all.

1.        What are the three causes the aggregate demand curve to slope downward? Consumption, investment, and net exports.

2.        What is the difference between the causes of the shifts of the aggregate demand curve and movements along the aggregate demand curve? The causes of shift depend on fluctuations in real GDP and the price level. The movements depend on consumption, investment and net exports.

3.        Why is there a difference between LRAS curve and the SRAS curve? LRAS curve shows the relationship in the long run between the price level and the quantity of real GDP supplied. SRAS curve shows the relationship in the short run between the price level and the quantity of real GDP supplied by firms.

4.       What is the difference between the causes of the shifts of the aggregate supply curve and movements along the aggregate supply curve? It captures the relation between real production and the price level. As the price level rises, real production is greater. As the price level fails, real production also declines.

1.        Why does the multiplier effect occur?  An initial increases in autonomous expenditure sets off a series of increases in real GDP.

2.        If the MPC is 0.75 and there is an increase in autonomous expenditure of $100 billion, what will the multiplier be? 750

3.        How does the federal budget deficit impact private investment?  Without the money, the private investment cannot make purchase they want to do.

1.        Which macroeconomic schools of thought believe that there is no difference between the short run and the long run aggregate supply curve? University of Chicago and New York University.

2.        Which economic schools of thought believe that the equilibrium level of real GDP per year is completely supply determined, and, that changes in aggregate demand affect only the price level, not real GDP? Carneige Mellon University and Arizona State University

3.        Which macroeconomic schools of thought believe that prices, especially the price of labor (wages), were inflexible downward due to the existence of unions and long-term contracts between businesses and workers? Harvard University.

4.        In whose model is increase in aggregate demand (AD) only leads to increase in real GDP and not the price level? Karl Marx

5.        In whose analysis does increase in AD lead to a lower short-run equilibrium increase than when the SRAS curve is horizontal, and to a higher price level that then causes planned purchases of goods and services to decline or rise to a level less than when the SRAS curve is horizontal? Karl Max

6.        Which macroeconomic school of thought said that when price level rises partially, real GDP can be expanded beyond the level consistent with its long-run growth path? Carneige Mellon University and Arizona State University

7.        An increase in aggregate demand will not raise the price level, and a decrease in aggregate demand will not cause the firms to lower prices.

8.        Which macroeconomic schools of thought made this statements and why? Carneige Mellon and Arizona State University, they argue that fluctuations in real GDP are caused by temporary shocks to productivity.

1.        What is your prediction of what you are about to read?  I predict certain schools will have different opinions on different parts of macroeconomics.

2.        How will you remember what you are about to read? I will take notes and make notes of keywords and key names in the reading passages.

3.        What are some things you are about to do to learn this information? Take notes, read carefully.

As you read, did you put each passage in your own words? Yes, I did.

ECO HW 6-14

How can inflation change the distribution of income? Inflation affects low earners more than high income earners. Low income earners tend not to rise as quickly as prices, therefore, their purchasing power decreases.

Why don’t there seem to be costs to anticipated inflation? The higher the rate of inflation, the lower the real rate of return on money, and the less money we want to hold, in real terms.  The costs of anticipated inflation are straightforward to correct with monetary policy.

Why do some individuals or firms experience a cost despite perfectly anticipated inflation? Depending on much money they make, they might or might not experience the inflation as strong as other firms.

Why do people dislike unanticipated inflation? People dislike inflation because of money illusion. They mistake their nominal incomes for real incomes and mistake consumer prices for the real cost of living.

Why does a new worker entering the labor force or a worker who has lost a job probably will not find an acceptable job right away? Due to frictional employment, the new worker needs to find the right job fit from them and the job needs to find the right person for the job. It takes time to find the job that is suitable for the worker and the person hiring the worker.

What are the categories of unemployment and their defining characteristics? Frictional unemployment, seasonal unemployment, and structural unemployment. Frictional unemployment is the time required to bring together employers and job seekers. Seasonal changes in labor demand cause jobs to disappear in the off season. Structural unemployment causes the government to intervene in the economy.

What do people whose skill become obsolete and therefore unemployed do to become employed again? Give an example. They need to learn and train at a brand new job. For example, people working at a toll, eventually when the toll machines become advanced in technology, the people will need to learn to do something better, a new job will be recommended.

Why do firms lay off workers during a recession and rehire during the following expansion? Some firms do not make enough money to pay the workers. When the expansion is around, they have enough money to pay for the workers.

What does the natural rate of unemployment consist of? Frictional and structural unemployment.