Consumer spending + Business investment + Government spending + Net Exports
Consumer spending is about 70% of GDP
Net exports = (Exports – Imports)
What happens to a country’s GDP if only their exports go up? What if only their imports goes up?
Trade deficit, trade surplus, balanced trade
If a country’s currency is strong, what happens to its trade balance (X-M) and therefore AD and GDP?
If a country’s currency is weak, what happens to its trade balance and therefore GDP?
Output-expenditure model
Aggregate Demand (AD); Aggregate means what?
The index of leading indicators
Unemployment (examples of each)
US Full employment = 5% unemployment
White collar worker
Blue collar worker
Frictional unemployment
Structrual Unemployment
Cyclical unemployment
Seasonal unemployment
Technological unemployment
Inflation
Who is hurt by inflation? Only debtors benefit from inflation—why?
Price Level (PL)
US Target inflation rate = 2%
Demand-pull inflation
Cost push inflation
Wage-price spiral
Hyperinflation
Deflation
Real GDP = Nominal GDP – inflation
Rule of 70
Inflationary gap; recessionary gap
Fiscal policy
Who controls fiscal policy in any country? In the US
What is the objective of fiscal policy?
What are the two tools of fiscal policy
Taxes – Government Spending = government budget
Budget deficit, Budget surplus, Balanced budget
John Maynard Keynes; What is Keynesian economics?
Monetary Policy
Interest rates are the price paid to spend someone else’s money
Expansionary or loose monetary policy; is the same as easy money (increase money supply—decrease interest rates
contractionary or tight monetary policy (what is it? When should it be used)
Central Bank; in the US it’s called the Federal Reserve or the Fed
Inverse relationship between money supply and interest rates
4 monetary policy tools: Reserve requirement, Federal Funds Rate, Discount Rate, Open market operations
Banking diagram with deposits, required reserves, and excess reserves (loans)
Fractional reserve system
How the Fed reduces money supply and its impact on interest rates and then the economy
2 goals of the Fed: Price stability and then full employment-economic growth
Open market operations:
“Buy Bonds Boosts the economy”; “Sell bonds Slows the economy”
How do high interest rates affect borrowers? Savers? How do low interest rates affect them?
What happens when the fed buys bonds? Sells bonds?
What is a junk bond? (high yield bond?)
Bonds; why do governments issue them? Why do investors want them?
Bonds—inverse relationship between bond prices and bond yields
Do risky bonds pay higher or lower interest rates? What about safe bonds?
If a country raises its interest rates to fight inflation, what will happen to the value of the country’s currency?
If a stable country today has its government’s finances get bad and no one will lend to them, what would happen to the demand for the country’s bonds, bond prices, bond interest rates,
Austerity measures, belt tightening (T – G)
US bonds as safe have
A country like Greece had a debt crisis. Now, their government finances are more stable. What happens to demand for their bonds, bond prices, bond yields?
Key pages from the book to know:
Chapter 13: Section I only
341: only GDP;
345-348 Personal Income, Disposable income, Consumer sector, Investment Sector,
Government Sector, and Foreign Sector (I’ll call this Net exports on the final exam)
Chapter 14: Section I,II, and III only (p. 401 good review page)
375-380 Business cycle, etc. ALL
382-387 unemployment ALL
389-392 Inflation is a general increase in prices in society; All except creeping/galloping
Inflation
Chapter 15: Section2
415-424 ALL; how banks work, monetary policy, etc.
427-428 monetizing the debt (only)
430-431 The politics of interest rates
Chapter 16;
438 GDP gap
447-454 All
05/06/201905/10/2019
Please study and review these C. 12 questions. Study them nightly.
Be sure when answering Q2, you number the 12 vocab words you are defining. Thank you!
04/10/2019 04/12/2019
Taxes vocabulary list:
C. 9 taxes vocab
03/25/201903/26/2019
Please use your phones/tablets/laptops.
cut/paste the following urls to get to the 2 current events. Read both of them and give me 10 bullet points for each article (so 20 bullet points) (ideas, opinions, etc).
Work on this every night. Pace yourself and chip away at it. There are 3 sections. Do 1 section each night.
DO NOT WAIT UNTIL THE LAST NIGHT TO DO THIS!
Chapter 4--Demand--3 sections
Read: 88-107
Answer the following 16 questions:
P. 93 2,4,5
p. 99 1-6
p. 107 1-7
02/09/201902/19/2019
These class lecture notes should help you on the test. At the least read them. Feel free to print them and put them in your binder and study them leading up to the chapter test.
Stocks and retirement savings; why invest in stocks
American dream includes retirement, owning a home, yearly vacations, and owning a car.
Someone born after the year 2000 will need $2 million saved in retirement (nest egg= one’s life savings for retirement).
Retirement means not earning income anymore. One will live off their life savings and then also receive a supplement to their life’s savings called Social Security.
In 2018, the average monthly Social Security check was $1414
67 years old: the age anyone born after 1960 can get their full social security benefits.
In 2016, the average American earned about $56,000 per year or $3200 monthly after taxes. One who saves nothing for retirement will go from $3200 monthly when working to only $1414 monthly with social security. That’s only 44% of one’s working income—a tough retirement!
Companies issues shares of stock to raise money for growth and expansion.
Investors buy stocks for the potential higher rates of return to pay for costly long term goals such as retirement savings.
Put your money to work for you! Stocks have been one of the best hedges against inflation over the past 100 years.
Stocks will need to be a major part of one’s retirement savings.
Stocks are risky: no insurance, no guarantee—you can lose all that you’ve invested.
Higher risk = higher rate of return
Stocks have averaged an annual 10% rate of return over the past 100 years (that doesn’t guarantee it will be the same going forward).
When there’s been a major downturn in the stock market over the past 100 years (Bear market=down more than 20% from a previous high), it has taken on average 3.5 years to get back to the break-even point.
Inflation is when prices rise in society. One needs their investment returns to be higher than inflation.
Inflation has averaged 2% yearly over the past 30 years.
If one earns 10% in the stock market when inflation is 2%, their real rate of return is 8%.
Rule of 70 tells how long something will double. Divide 70/% to tell how long something will double.
70/10% stock market return = 7 years for investment to double
70/1% savings account = 70 years for an investment to double
Which is riskier in terms of saving more than $2 mn: the stock market or saving in safe, low returning savings accounts?
Two stock markets in the US: New York Stock Exchange (NYSE) and the NASDAQ
01/16/201901/29/2019
lease read section 3 in Chapter 2. Read pages 46-51. Then answer p. 51, 1-8 (in complete senntences except Q. 2)
01/16/201901/24/2019
Please read Pages 33-39 and pages 41-44. Then answer the following 15 questions:
Please read pages 447 - 454 and ESPECIALLY READ PAGES 382-387 (there are many questions on the final from this section).
Then answer the following questions:
p. 454 1-8
p. 387 1-5
12/03/201812/07/2018
Please read pages 415 - 424 and also read pages 426-431. Then answer the following questions
p. 424 1-5
p. 431 1-6
11/28/201811/29/2018
copy and paste the link below into your browser. Print the article. Read it, highlight the key points, emphasizing GDP = C + I + G + Xn numbers (write this equation in your homework assignment and put the actual numbers in.
Then write a minimum of a 3/4 page summary of the article.
So turn in the article, highlighted, and then stapled to your 3/4 page summary.
Additional settings for Safari Browser.
