Here is a link over, The Balance of Payments, I hope this gives you a better idea !!
https://m.youtube.com/watch?v=W0YwGLz50TA
Monday, May 9, 2016
Last Notes of Unit 7
Absolute Advantage
-Individual- exists when a person can produce more of a certain good/ service than someone else in the same amount of time (or can produce a good using the least amount of resources.)
-National-exists when a country can produce more o a good/ service than another county can in the same time period.
Comparative Advantage
-A person or a nation has a comparative advantage in the production of a product when it can produce the product at a lower domestic opportunity cost than can a trading partner.
Examples of output problem:
*word per minute
*miles per gallon
*tons per acre
*apple per tree
*television produced per hour
Examples of input problems:
*number of hours to do a job
*number of acres to feed a horse
*number of gallon of paint to paint a house
Specialization and trade
-Gains from trade are based on comparative advantage, not absolute advantage
(who can d what in a certain amount of time)
-Individual- exists when a person can produce more of a certain good/ service than someone else in the same amount of time (or can produce a good using the least amount of resources.)
-National-exists when a country can produce more o a good/ service than another county can in the same time period.
Comparative Advantage
-A person or a nation has a comparative advantage in the production of a product when it can produce the product at a lower domestic opportunity cost than can a trading partner.
Examples of output problem:
*word per minute
*miles per gallon
*tons per acre
*apple per tree
*television produced per hour
Examples of input problems:
*number of hours to do a job
*number of acres to feed a horse
*number of gallon of paint to paint a house
Specialization and trade
-Gains from trade are based on comparative advantage, not absolute advantage
(who can d what in a certain amount of time)
***Smallest number is who has opportunity cost***
Thursday, April 28, 2016
Exchanges
Foreign Exchange (FOREX)
- the buying and selling of currency
*example: in order to purchase souvenirs in France, it is first necessary for Americans to sell their dollars and buy Euros
- any transactions that occurs in the balance of payments necessitates foreign exchange
-Exchange Rate (e) is determined in foreign currency markets
Changes in Exchange Rates
-exchange rates (e) are a function of supply and demand for currency
+an increase in the supply of a currency
+a decrease in supply of a currency will increase the exchange rate of currency
+increase in demand for currency will increase the exchange rate of currency
+decrease in demand for a currency will decrease the exchange rate of currency
Appreciation and Depreciation
-appreciation of currency occurs when exchange rate of that currency increases (e^)
-depreciation of a currency occurs when the exchange rate of that currency decreases
Exchange Rate Determinants
-consumer tastes
-relative income
-relative price level
-speculation
Exports and Imports
-exchange rate is a determinant of both exports and imports
-appreciation of the dollar causes american goods to be relatively more expensive and foreign goods to be relatively cheaper, thus reducing exports and increasing imports
-depreciation of the dollar causes american goods to be relatively cheaper and foreign goods to be relatively more expensive thus increasing exports and reducing imports
- the buying and selling of currency
*example: in order to purchase souvenirs in France, it is first necessary for Americans to sell their dollars and buy Euros
- any transactions that occurs in the balance of payments necessitates foreign exchange
-Exchange Rate (e) is determined in foreign currency markets
Changes in Exchange Rates
-exchange rates (e) are a function of supply and demand for currency
+an increase in the supply of a currency
+a decrease in supply of a currency will increase the exchange rate of currency
+increase in demand for currency will increase the exchange rate of currency
+decrease in demand for a currency will decrease the exchange rate of currency
Appreciation and Depreciation
-appreciation of currency occurs when exchange rate of that currency increases (e^)
-depreciation of a currency occurs when the exchange rate of that currency decreases
Exchange Rate Determinants
-consumer tastes
-relative income
-relative price level
-speculation
Exports and Imports
-exchange rate is a determinant of both exports and imports
-appreciation of the dollar causes american goods to be relatively more expensive and foreign goods to be relatively cheaper, thus reducing exports and increasing imports
-depreciation of the dollar causes american goods to be relatively cheaper and foreign goods to be relatively more expensive thus increasing exports and reducing imports
Unit 7 The Balance of Payments
-measure of money inflows and outflows between the US and the Rest of the World (ROW)
+inflows are referred to as CREDITS
+out flows are referred to as DEBITS
-the balance of payments is divided by 3 accounts
1. current account
2. capital/ financial accounts
3. official reserves accounts
Current Accounts
- balance of trade or net exports
-net foreign income
-net transfers (tend to be unilateral)
Capital/ Financial Accounts
- the balance of capital ownership
-includes the purchase of both real and financial assets
-direct investment in the US is a credit to the capital account
-direct investment by US Firms/ individuals in foreign country are debits to capital accounts
-purchase of foreign financial assets represents a debit to a capital account
-purchase of domestic financial assets by foreigners represents a credit to the capital accounts
***the current account and the capital account should zero each other out***
Official Reserves
-foreign currency holdings of US Federal Reserve System
-when there is a balance of payments surplus the FED accumulates foreign currency and debits balance of payments
-when there is a balance of payments deficit FED depletes its reserves of foreign currency and credits balance of payments
Active US passive official reserves
-the US is passive in its use of official reserves
+inflows are referred to as CREDITS
+out flows are referred to as DEBITS
-the balance of payments is divided by 3 accounts
1. current account
2. capital/ financial accounts
3. official reserves accounts
Current Accounts
- balance of trade or net exports
-net foreign income
-net transfers (tend to be unilateral)
Capital/ Financial Accounts
- the balance of capital ownership
-includes the purchase of both real and financial assets
-direct investment in the US is a credit to the capital account
-direct investment by US Firms/ individuals in foreign country are debits to capital accounts
-purchase of foreign financial assets represents a debit to a capital account
-purchase of domestic financial assets by foreigners represents a credit to the capital accounts
***the current account and the capital account should zero each other out***
Official Reserves
-foreign currency holdings of US Federal Reserve System
-when there is a balance of payments surplus the FED accumulates foreign currency and debits balance of payments
-when there is a balance of payments deficit FED depletes its reserves of foreign currency and credits balance of payments
Active US passive official reserves
-the US is passive in its use of official reserves
Friday, April 8, 2016
Unit 5-Extending the Analysis of Aggregate Supply
Short run aggregate supply-
-this is the period in which wages (and other input prices) remain fixed as price level increase or decrease.
long run aggregate supply-
-period of time in which wages have become fully responsive to changes in price level.
****Remember how crucial worker salaries o a businesses out out and bottom line when considering effects on aggregate supply******
effects over short run-
-in the short run , price level changes allow for companies to exceed normal out puts and hire more workers because profits are increasing while wages remain constant.
-in the long run , wages will adjust to the price level and previous output level will adjust accordingly.
equilibrium in the extended model-
-the extended model means that both the short run and long run AS curves.
- the long AS curves is represented with a vertical line at full employment level of real GDP.
Demand pull inflation in the AS model-
- demand pulls (to the right) which causes prices to increase based on increase in aggregate demand.
-in the short run , demand pull will drive up prices , and increase production
-in the long run, increase in aggregate demand will eventually return to previous levels.
Cost push and the extended model-
-cost push (to the left) arises from factors that will increase per unit costs such as increase in the price of a key resource.
dilemma for the government-
-in and effort to fight cost push, the government can react in 2 different ways:
1. action such as spending by the government could begin an inflationary spiral.
2. no action however could lead to recession by keeping production and employment levels declining.
-this is the period in which wages (and other input prices) remain fixed as price level increase or decrease.
long run aggregate supply-
-period of time in which wages have become fully responsive to changes in price level.
****Remember how crucial worker salaries o a businesses out out and bottom line when considering effects on aggregate supply******
effects over short run-
-in the short run , price level changes allow for companies to exceed normal out puts and hire more workers because profits are increasing while wages remain constant.
-in the long run , wages will adjust to the price level and previous output level will adjust accordingly.
equilibrium in the extended model-
-the extended model means that both the short run and long run AS curves.
- the long AS curves is represented with a vertical line at full employment level of real GDP.
Demand pull inflation in the AS model-
- demand pulls (to the right) which causes prices to increase based on increase in aggregate demand.
-in the short run , demand pull will drive up prices , and increase production
-in the long run, increase in aggregate demand will eventually return to previous levels.
Cost push and the extended model-
-cost push (to the left) arises from factors that will increase per unit costs such as increase in the price of a key resource.
dilemma for the government-
-in and effort to fight cost push, the government can react in 2 different ways:
1. action such as spending by the government could begin an inflationary spiral.
2. no action however could lead to recession by keeping production and employment levels declining.
Sunday, April 3, 2016
Sunday, March 27, 2016
Unit 4- video summary blogs
#1 blog video
This video was very useful, and informative about general uses of money. There is three types of money which is commodity, representative, fiat money; commodity money is money that can be used in varies ways, representative money is money that has back up such as gold and silver coins, but we do not use anymore in today's uses, also fiat money which is money that we use today and is not backed up by anything, it is money that we are able to apply through transactions. As there is three types of money, there is also three functions of money! Three function of money is medium of exchange, store of value and unit of account. Money of medium is when you buy something you receive something, such as when you go to the store to get a item(s) you will exchange it with money, Store of value is money that is being saved, such as when you store in the bank account, but as you store in the bank the money begins to have less purchasing powers as years pass by, also Unit of account which is to judge the more money it cost the better the quality which isn't always true
#2 blog video
Money Market is a review of what we have done before in class, with the graph, labeling and also graphing with equilibrium. In reference she mentioned how interest rate always goes on the y-axis and the quantity goes on the x axis, also how supply money is vertically in the middle as the original graph. SM which means supply money does not very from interest rate, but can move left or right in order to stabilize the interest rate. supply money is a fixed line that does not change, unless the FED changes it. FED will change the supply money in order to not have a high interest rate during a recession so they increase the supply money by moving it to the right and it will stabilize interest rate to the original equilibrium. Having a stabilized interest rate can fix many problems such as determining investment, also to manipulate the aggregate demand (AD) to find the right economy changes.
#3 blog video
The FED: Tools of Money Policy includes 2 main components which is expansionary known as "easy money" and contractionary known as "tight money". Usually they are the opposite such as when the required reserves (RR) decrease under expansionary, the contractionary increases. Required reserves is the money the bank must hold on to and cannot loan out to the public, or anyone. Excess reserves is part of the money that the bank can loan out from what is kept of the required reserves. Also such as the discount rate which isn't really effective, but represents the rate banks can borrow from the FED. When banks are low on loans they borrow from the FED for at least a day and pay them back which the FED will charge them interest rate for what they borrowed. As discount rate can sell or buy bonds, under expansionary they buy bonds and under contractionary they sell bonds. When they say "buy bonds" they really mean the FED buys the bond and the public receives the money, as you can remember it as "Buy bonds= Big bucks" shown in the video. When they say "sell bonds" they really mean the public are buying the bonds and the FED is receiving the money. What controls the FED is known as Federal Open Market Comity (FOMC) which makes all the FED's decision. There is also something known as the Fed Fund Rate which is when banks borrow money from each other.
#4 blog video
Loan able Funds have the same/ similar graph as all others just representing different shifts of the money market and the the loan able funds market. The money market deficit means that the government wants more money which will increase the interest rate. Increasing loan able funds also increases interest rates, which is taking a demand for both which will also increase the interest rate. Decreasing the supply money government will demand for a great value of money which will cause the supply to decrease and interest rate to increase.
#5 blog video
Money creation process are such as money multiplier, and multiplier deposit expansion. Money creation process is when it is creating money by making loans. In this video they have used required reserves (RR) which is the percentage that banks must keep in the reserves from someones deposit. They also mention about excess reserves (ER) which is what the bank can loan out frrom someones deposit, which is the part that is not in the required reserves. There is equations to figure out how much for required reserves, excess reserves, and demand deposits. Wording of questions are very tricky on what exactly that they are asking. Money being re deposited is the multiplier deposit expansion.
#6 blog video
American money is not only used for our use, but also for the government to borrow from us. If there is an increase in government spending, there will be an increase in demand of money due to the amount of money the government is borrowing. US has the most debt, from borrowing so much from us, Americans, Aggregate Demand (AD) can increase just how it can in many other scenarios, but in this specific scenario it caused it because government is increasing their spending which will increase the demand of money. Government can either help or hurt us, but in this video it caused aggregate demand to increase. In this video they mention about the fisher effect which is the increase in interest rate so it can be equivalent to the increase in price level, an example is such as when interest rate increases by 1% also will the inflation rate increase by 1%.
This video was very useful, and informative about general uses of money. There is three types of money which is commodity, representative, fiat money; commodity money is money that can be used in varies ways, representative money is money that has back up such as gold and silver coins, but we do not use anymore in today's uses, also fiat money which is money that we use today and is not backed up by anything, it is money that we are able to apply through transactions. As there is three types of money, there is also three functions of money! Three function of money is medium of exchange, store of value and unit of account. Money of medium is when you buy something you receive something, such as when you go to the store to get a item(s) you will exchange it with money, Store of value is money that is being saved, such as when you store in the bank account, but as you store in the bank the money begins to have less purchasing powers as years pass by, also Unit of account which is to judge the more money it cost the better the quality which isn't always true
#2 blog video
Money Market is a review of what we have done before in class, with the graph, labeling and also graphing with equilibrium. In reference she mentioned how interest rate always goes on the y-axis and the quantity goes on the x axis, also how supply money is vertically in the middle as the original graph. SM which means supply money does not very from interest rate, but can move left or right in order to stabilize the interest rate. supply money is a fixed line that does not change, unless the FED changes it. FED will change the supply money in order to not have a high interest rate during a recession so they increase the supply money by moving it to the right and it will stabilize interest rate to the original equilibrium. Having a stabilized interest rate can fix many problems such as determining investment, also to manipulate the aggregate demand (AD) to find the right economy changes.
#3 blog video
The FED: Tools of Money Policy includes 2 main components which is expansionary known as "easy money" and contractionary known as "tight money". Usually they are the opposite such as when the required reserves (RR) decrease under expansionary, the contractionary increases. Required reserves is the money the bank must hold on to and cannot loan out to the public, or anyone. Excess reserves is part of the money that the bank can loan out from what is kept of the required reserves. Also such as the discount rate which isn't really effective, but represents the rate banks can borrow from the FED. When banks are low on loans they borrow from the FED for at least a day and pay them back which the FED will charge them interest rate for what they borrowed. As discount rate can sell or buy bonds, under expansionary they buy bonds and under contractionary they sell bonds. When they say "buy bonds" they really mean the FED buys the bond and the public receives the money, as you can remember it as "Buy bonds= Big bucks" shown in the video. When they say "sell bonds" they really mean the public are buying the bonds and the FED is receiving the money. What controls the FED is known as Federal Open Market Comity (FOMC) which makes all the FED's decision. There is also something known as the Fed Fund Rate which is when banks borrow money from each other.
#4 blog video
Loan able Funds have the same/ similar graph as all others just representing different shifts of the money market and the the loan able funds market. The money market deficit means that the government wants more money which will increase the interest rate. Increasing loan able funds also increases interest rates, which is taking a demand for both which will also increase the interest rate. Decreasing the supply money government will demand for a great value of money which will cause the supply to decrease and interest rate to increase.
#5 blog video
Money creation process are such as money multiplier, and multiplier deposit expansion. Money creation process is when it is creating money by making loans. In this video they have used required reserves (RR) which is the percentage that banks must keep in the reserves from someones deposit. They also mention about excess reserves (ER) which is what the bank can loan out frrom someones deposit, which is the part that is not in the required reserves. There is equations to figure out how much for required reserves, excess reserves, and demand deposits. Wording of questions are very tricky on what exactly that they are asking. Money being re deposited is the multiplier deposit expansion.
#6 blog video
American money is not only used for our use, but also for the government to borrow from us. If there is an increase in government spending, there will be an increase in demand of money due to the amount of money the government is borrowing. US has the most debt, from borrowing so much from us, Americans, Aggregate Demand (AD) can increase just how it can in many other scenarios, but in this specific scenario it caused it because government is increasing their spending which will increase the demand of money. Government can either help or hurt us, but in this video it caused aggregate demand to increase. In this video they mention about the fisher effect which is the increase in interest rate so it can be equivalent to the increase in price level, an example is such as when interest rate increases by 1% also will the inflation rate increase by 1%.
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