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Macroeconomics Ch 23

This is the last chapter in the course. I hope you have enjoyed the course and are saddened to see it end. What concepts or theories did you find most interesting and / or useful? Is there an area where you changed your thinking? Re this chapter: which debate do you consider most important and interesting? Which side do you agree with? Why?

I have enjoyed this course; I find the science of the economy very interesting. With so many variables encompassing this course in macroeconomics offered a way to simplify the overwhelming complexities that make up our economical matrixes we encounter every day.

Having only life experience with viewing the economy, this course has broadened my view of our economy, and unveiled some of the mystery regarding the flow of our economy in the booms and recessions I have experienced in my life. The ten basic principles have been a great foundation for this, and I appreciated all of the concepts. However, if I was to choose one concept that was most interesting to me, would definitely be in the last chapters in discussion about the short run trade-offs that society faces between inflation and unemployment. I especially found the role of expectations interesting in the impact of inflation on unemployment. Making me curious if there is a way that we can as a society become more conscious in our own expectations of how the economy fluctuates creating a better way to handle the unexpected bumps along the way. How does government set up the appropriate expectation for the masses? How do the masses agree about what to expect from the economy? I suppose this is where sociology and economics may meet.

In the last chapter, I felt that all the debates were interesting and important, but I especially found the last one the most important. Should tax laws be reformed to encourage savings? A simple question at first glance, however the complexities that are instilled in the question are great. I think something needs to shift to encourage savings. Tax laws may encourage this, however some great points are raised in the arguments against the use of tax laws to promote this. The one that I agree with, is the fact that it would reduce government revenue leading to a higher budget deficit potentially making matters worse for our country.  Yet, is it possible to provide an incentive to save, invest and not sacrifice government earnings? I suppose it may be having your cake and eating it too.

Bibliography

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch 22

Describe the short run trade-off between inflation and unemployment. Why is there not a long-run trade-off? How long do you think the short-run run lasts? (Or do you believe there is a trade-off at all – many economists don’t? Why?)

According to the Phillips Curve, the short run trade-off has a negative association between the inflation rate and the unemployment rate. When inflation is high unemployment is low and when inflation is low unemployment is high.

There is not a long run trade off due to the natural rate of unemployment. It is due to the fact that “people come to expect whatever inflation rate the Fed chooses to produce and nominal wages will adjust to keep pace with inflation.” (Mankiw, 2018)This expectation is one of the factors that drives the short run Phillips Curve. Where Unemployment rate = Natural rate of unemployment – a(actual inflation – expected inflation).

I think the short-run run lasts as long the expected inflation is disproportionate to the goals of the government. When a government instills a policy in attempt to reduce the inflation rate, many peoples either disagree with the policy or don’t trust the policy to work, and it takes time for the people’s expectations to adjust to the policy and their expectations to align with the reality of the policy and the benefits that it will offer.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch 21

How does consumer confidence interact with public policies when in a recession?  How about in a boom?  Does it make policies more effective or less effective in achieving economic stability? Why?

Consumer confidences interacts with public policies when in a recession or a boom. If consumers are pessimistic about the economy, they reduce their spending reducing aggregate demand, lowering production and increasing unemployment. In a boom the opposite happens, consumers are optimistic, and they increase their spending, increasing the aggregate demand increasing production, and lowering unemployment.

This fluctuation in consumer confidence offers an antagonist effect on public policies that are meant to stabilize the effect. Overall, public policies that are put into place are many times are placed into action far after the recession has already began to stabilize. However, that being said public policies do help support consumers in restoring confidence in the economy such as government spending creates the multiplier effect which “can amplify the impact of changes in spending.” (Mankiw, 2018)Yet, government interference in the economy must be closely watched as crowding out may occur, and many times implemented policies offer little influence or benefit in the long-run scheme of the economics. Yet, citizens want to see action from their leaders when it comes to economic policies. The non-action of a complacent government, may indeed balance out the economy in the long-run, but in the short-term is where most people live and a recession hurts everyone’s ideals of growth and prosperity.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch 20

Aggregate supply and demand are factors in short run economic fluctuations. These fluctuations are irregular and unpredictable along the long-run trends. The short run aggregate demand curve slopes downward because of the wealth effect, an increase in the price level reduces the real value of money. The interest-rate effect, a higher interest rate discourages investment spending. And the exchange-rate effect, as the real value of the dollar increases net exports and the quantity of goods and services demanded is reduced.

The short-run aggregate supply curve slopes upward due to three proposed theories, sticky-wage theory, sticky-price theory, and the misperception theory, regardless of which is correct it is known that output deviates in the short run when price levels deviate from price expectations of people. However, the long run supply curve is vertical as the goods and services supplied depends upon the economy’s labor, capital, natural resources and technology and not on the price level.

Events or policies that reduce consumption, investment, government spending, or net exports shift the aggregate demand curve to the left, can cause an economic downturn. Another cause of a fluctuation is a shift for the aggregate supply curve to the left which could be brought on by changes in labor, capital, natural resources, or technology. This shift could affect not only the short-run curve but may also impact the long run curve as well. Overall, economic fluctuations are a part of every economy, and with careful watch can be mitigated.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch 19

Pretend for  moment you are teaching this class and you need to write questions for an exam covering this chapter.  Write three short answer questions and give 2 answers for each -- an adequate response and a very good response.  You questions should cover highlights from the chapter.  Don't choose identification or list questions, require some analysis.  A answers are generally longish.

How does the government budget deficit push a country into a trade deficit?

A- It pushes a country into a trade deficit by raising real interest rates, crowding out domestic investment, and causing the currency to appreciate.

VG - As a government’s budget deficit increases it changes lessens the supply of loanable funds. In doing so the supply curve of loanable funds shift left. Thus the net capital outflow decreases, reducing the supply of dollars able to be exchanged into foreign currency, causing the real exchange rate to appreciate. All of which tip the trade balance toward deficit.

How do trade policies effect trade balance?

A- Trade policies do not affect trade balance.

VG - Despite many lobbyists in the government, trade policies work more on a microeconomic level and do not affect trade balance. When a trade policy is implemented, it may rise net exports for any given real exchange rate appreciating the dollar, which then offsets the direct effect on the import quota of the trade balance by reducing the net exports. Thus trade policies do not affect the trade balance.

How is the strength of the America Dollar an advantage and a disadvantage in our United States Economy?

A- A strong dollar increases standards of living, allowing us to buy a lot in foreign countries, however a weak dollar enables us to export more shrinking our trade deficit.

VG - The strength of the dollar is advantageous and disadvantageous depending upon the state of our current economy. When we have a strong economy, a strong dollar enables us to be prolific in our foreign currency exchange creating a very healthy quality of life. However, when our economy downturns, a strong dollar can work against us. With a weaker dollar in this circumstance our domestic products would be less expensive attracting and stimulating exports of our goods, lowering our trade deficit, also increasing our productivity and employment stimulating the economy into a better place where the strength of the dollar can grow with the economy.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch 18

Three things I found interesting in Chapter 18 were the concepts of ta balanced trade, the relationship between net capital outflow (NCO) with trade surplus and trade deficit, and the purchasing-power parity.

Balanced Trade is the concept that a Country’s imports and exports are exactly equal. Living in a time with major policy concerns over the United States’ trade deficit, this concept appeals to me in the sense it is the utopian version of international commerce. This idealist version of a perfect balance is something I view as an impossible ideal in our times, however many policy placers and aspiring leaders view this as a goal our economy and culture should work towards. Perhaps, if they work on policies that promote our economy to increase GDP instead of focusing so much on our imports, a natural balance and lessening of our trade deficit would occur.

NCO, “the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners” (Mankiw, 2018)measures our capital flowing in or out of a country. Currently being in a trade deficit, we are buying more goods in other countries, in doing so our assets are being sold abroad. Currently our NCO is negative because savings is less than investment. Meaning that we are funding our investments by selling assets abroad. Granted, this is a fiery subject with many different opinions. Overall, I feel that the trade deficit is not the problem, the problem is the lack of policies that encourage our own development and growth. Perhaps not a policy on an import tariff, but a policy offering a tax cut on innovative exports?

The purchasing-power parity, is “a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries” (Mankiw, 2018)Although, not a perfect theory, it enables countries to define an expected exchange rate for money as one travels abroad. This is linked and effected by inflation policies that countries may experience. In a situation of hyperinflation in country A the power of the money in Country B increases, which is also true for the reciprocal. As with most theories in life, there are limitations and variables that must be considered. With the purchasing-power parity many goods are not easily traded, and the balance of the purchasing power is limited. The other limitation is the actual products purchased are not always perfect substitutes. An example is in the fashion industry. Some consumers may hold a higher demand for a bag or dress made in France, over the United States, or vice versa. This demand will drive up or lower the costs on these fashion items. Arbitrage would be moot, since consumers would view these two products differently in their demand for consumption.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch 17

What are the costs of inflation?  Which is most important?  

The costs of inflation are a closely watched issue amongst economists. There are six costs of inflation including, the shoe leather costs, menu costs, increased variability of relative prices, inflation-induced tax distortions, confusion and inconvenience, and arbitrary redistributions of wealth. The most important costs vary depending upon the rate and level of inflation in the society. For example, the shoe leather cost, or the many trips one must make it to the bank, to preserve the value of the money as quickly as possible, is more important and applicable in a high velocity inflation rate, where the money changes value very quickly, and any delay in depositing, or transferring it into a more stable form of income such as food or other currency is needed. However, in a slower inflation rate economy, a more important cost may be the inflation-induced tax distortions, which may exaggerate the size of your capital gains increasing the tax burden on capital income. There are many other effects of inflation on tax distortion which all lead to people from saving, which in turn slows our economy’s long-run growth potential.

How about deflation?  Would that be a problem and for whom? The FRB worries more about deflation. Why? Do you agree? Why or why not?

Deflation may be a result from deep economic problems that usually arrive in an economy as a surprise. This becomes a problem for debtors and benefits creditors. Debtors are usually poorer than creditors, and with deflation it increases the pressures of this poverty. This is why the FRB worries about the deflation as it can impact the entire economy in a cycle of downturns upon downturns. I agree that deflation left unchecked can be detrimental to the economy, however if the Friedman rule was followed it may reduce the cost of holding money, promoting a greater spending and increase in the GDP.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch16

The phrase "printing money" tends to be tossed around in discussions about the money supply.  How important is cash to the overall money supply?  

Cash, also known as currency is important to the overall money supply as it is a component of our total Money Stock. However, cash, tends to be one of the items that has a habit of becoming outstanding. For example, in “January 2016, there was $1.4 trillion of currency outstanding” (Mankiw, 2018). This large number may be due to illegal activities or currency that has traveled abroad. Cash is simply one component that makes up a tiny fraction of our total Money Stock. As technology increases, cash is becoming more and more obsolete, and thus becoming less and less important to the entire money stock.

In our system the Federal Reserve Board has at least some control over the money supply.  How are they related to the Federal government? Recently the FRB has been pushing up interest rates.  Why?

The Federal Reserve Board is related to the Federal government as the President chooses the members and the Senate confirms them. Their terms are 14 years, also the President chooses the most important member, the chair, to a 4-year term. The FRB recently has been pushing up interest rates as the economy has continued to show signs of growth and stability in an effort to keep the economy from growing too quickly leading to a large burst of inflation.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

Wessel, D. (2018, October 12). Wessel's Economic Update: Are the Fed's interest rate hikes a mistake?Retrieved from Brookings: https://www.brookings.edu/blog/up-front/2018/10/12/wessels-economic-update-are-the-feds-interest-rate-hikes-a-mistake/

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Macroeconomics Ch 15

Why will there always be at least some unemployment?  Give an example of a public policy that affects the unemployment rate.  Is it positive or negative? Why?  

There will always be at least some unemployment because of several factors. First is the job search, as people are being matched with their ideal job and employers are matching ideal candidates with their ideal employees that process ‘job search’ will always result in terms of unemployment. Another factor is frictional unemployment which occurs when there are “changes in demand for labor among different firms.” (Mankiw, 2018). The government also affects unemployment rates through policies. A classic example is the policy of minimum wage. This policy impacts the young and unskilled workforce, as it increases the wage avove the equilibrium market for this sector. Wether or not this topic is positive or negative, it depends upon the perspective one takes on the issue, Minimum wage laws attempt to implement efficiency wages for all spectrums of workers, however the result is a higher unemployment range for unskilled workers, making it more difficult for them to find employment.

In what ways do unions affect the natural rate of unemployment? How about human resource regulations, such as safety or age-based rules?  Do all of these affect the cost of hiring employees? Should the affect of a regulation on employment be considered as a part of the adoption process? Why or why not?

Unions affect the natural rate of unemployment when they organize and raise the wages above the equilibrium level. Like a minimum wage, it affects the supply and demand of workers increasing unemployment. Human resource regulations too affect unemployment, whether it be age-based rules, safety considerations discriminating against certain groups, or affirmative action policies affecting hiring, all play a role in unemployment by hiring certain groups of individuals and not other groups. Implementing these regulations also increase the cost of the human resource department due to the necessary administration to oversee the regulation of these policies and place them into action. These regulations are a part of doing business and must be considered as a part of the adoption process. As employers seek employees to help them with productivity, they must roll these costs that are incurred into account in order to maximize their profits. If they keep in mind the human value of well-paid workers overall the costs in time will be worth the weight in an efficient productive workforce turning out profits for the employer.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch14

Have you considered the trade-off between risk and return when making an investment? Did it change your investment? Do you expect a risk premium related to the level of risk?

Absolutely! In 2015, when I purchased the massage studio with my business partner, I extensively thought about the risk and return upon it. After careful thought I went ahead with the investment. Overall, well into our third year, I would undoubtedly say the risk felt fairly minimal upon the investment, however, there was the expectation of some risk premium in correlation with this venture.

Why is the present value of a dollar more valuable than its future value?

The present value of a dollar is more valuable than its future value because when you possess the present dollar you are able to utilize it to either save and or invest and earn interest upon it as it matures. Another note, as inflation occurs the same amount of money today, will be valued less in the future, another reason that the present value of a dollar is more valuable than its future value.

Works Cited

Mankiw, N. G. (2018). Macroeconomics. Boston, MA: Cengage Learning.

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Macroeconomics Ch13

How does private savings impact investment?  

Private savings is the amount of monies leftover from a household after it has finished paying its consumption and taxes. With this money if it is deposited into a financial intermediary such as a bank, the bank can then lend the monies out to a borrower to aid in their investments. In whole, private savings add to our national savings, which in turn equals our national investment through our financial system.

Why is it important for individuals to save in an economy?  

This key relationship of Savings to Investment, is the very core of why it is important for individuals to save in an economy. Without a national savings, we would not have the ability to have investment and investment leads to growth of our nation as a whole.

How do public policies such as tax policies affect savings rates?  

Tax policies and other public policies affect savings rates through incentives and or lack thereof, without incentives for the public to save, such as taxing interest earned on savings, lessens the desire for people to save affecting supply curve of loanable funds.

How do government budget deficits affect interest rates?

As government budget deficits increase public savings decrease. As the government borrows more, a shift in the supply curve of loanable funds moves to the left increasing interest rates, and decreasing incentives for investment activities.

The US is running record budget deficits.  Define crowding out. Look for an article talking about it.  Do you think it's a problem? Why or why not?

Crowding out is when the government’s borrowing to finance its deficit creates a fall in investment due to the increase of interest rates resulting in the discouragement of participating in the lending market. I think that at our current rate of Federal Debt, and with our spending to continue exceeding our revenues there is a real problem that needs to be addressed as quickly as possible to mitigate potential long-term crashes. According to David Wessel, a Senior Fellow of Economic Studies, if our current rate of spending continues without change, “the federal debt will climb over the next 20 years to 118 percent of GDP, exceeding the peak that followed World War II.” (Wessel, 2019) Without some change at this rate, something will have to give, whether it will be a huge financial crisis as in 2008/09, or a continual money distribution towards interest instead of infrastructure, or simply an abrupt halt to investment as the government ‘crowds out’ through its deficit, eventually all debts must be paid. Unsure of where this will lead, I think a conservative approach would be best to take heed, and diligently work on this issue now, so it will enable us to soften the long term affects for generations to come discouraging abrupt and large changes in benefits and / or taxes that the government may be forced to implement to stay afloat.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

Wessel, D. (2019, January 4). UP FRONT The Hutchins Center Explains: How worried should you be about the federal debt?Retrieved from Brookings: https://www.brookings.edu/blog/up-front/2019/01/04/the-hutchins-center-explains-how-worried-should-you-be-about-the-federal-debt/

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Macroeconomics Ch12

What affects human productivity?  Does public policy affect the availability of resources people need to be productive?  How? Give an example of a public policy you think either inhibits or promotes long run productivity growth.

Human productivity is affected by physical capital, structures or equipment that is used to produce goods and services, human capital, the knowledge and skills that people possess to apply in their work, natural resources, the natural inputs that assist in the production of goods such as land, mineral deposits, rivers, trees, etc., as well as technological knowledge, the knowledge society has about the most efficient ways of producing goods and services.

Public policy definitely affects available resources people need to be productive. For example, if a government deemed a forest protected then people could not utilize the natural resources to produce goods from the forest. Another example, if a government denied the ability for all female citizens to educate themselves, then the human capital of the country would be diminished, lowering their productivity as well.

A government policy that I am concerned may inhibit long run productivity growth is the number of women who may lose birth control coverage due to the new rules posed by the Trump administration, allowing many employers to opt out of providing the benefit. This loss may lead to a number of women, conceiving and giving birth to children that were not planned for nor prepared for. Granted, there are valid arguments in a greater population leading to a greater pool of potential technological advances, however in our country this would not be the case. These women would drop out of the work force, or limit their work ability lessening their productive output, causing their incomes to decrease, and their children would not receive the same benefits of human capital, healthcare and overall opportunities, that other planned children would be able to afford. This policy, if continued will not only lead to a lessening of our GDP economically, will also increase the disparity between the rich and the poor. This increase in economical gap will undoubtedly have long term dwindling effects on our country’s productivity leading to a dwindling standard of living for all.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

Thanawala, S. (2019, January 11). Judge: Women would lose birth control coverage under rules . Retrieved from abcNEWS: https://abcnews.go.com/Health/wireStory/california-heads-court-fight-trump-birth-control-rules-60305080

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Macroeconomics Ch11

Many of you live in an area with high cost of living.  Is that something you considered before you moved to a ski area?

I absolutely did not consider cost of living prior to moving to Breckenridge (I’m not sure many locals do), I just came out for a Season in 2002, and I haven’t left yet… I, like so many who move to ski areas fell in love with the lifestyle, that the cost of living becomes a part of it; work hard, play hard, repeat…and yes ‘he with the most toys, does win’.

1.  How much can someone change the rate of inflation they face by changing what they purchase? Is this a serious overestimation problem with the CPI? Do you time your purchases around sales? Do you change your purchases because of sales?

Someone can change the rate of inflation they face by changing what they purchase to certain level. Most people can choose to purchase goods and services according to a budget, for example if a consumer was in the market to purchase a vehicle, and the vehicle they were eyeing inflated in price suddenly they could choose to purchase a different model that was within the price range they were thinking. If inflation of certain foods incurred, they could also choose to purchase only foods that remained at a lesser price. However, if inflation of housing prices incurred in their area, it would be difficult for them to pay rent or purchase a home without incurring the increase in cost, another example, would be inflation in gas prices. Yes, they could stop driving so much, but eventually they would have to purchase gas at the price it has inflated to. Undoubtedly, there are ways for people to mitigate inflation’s effects upon their own pocketbook, however, it is difficult to completely mitigate the increase in CPI within their own lives. I think the CPI perhaps overestimates some, however, I would not consider it a ‘serious problem’ as in most cases it matches closely with the GDP Deflator, as well as recently been validated with new methods of calculating inflation such as the Billion Prices Project. For me personally and my purchases, I generally time my large purchases (costs of over $150) around sales and/or seek unique methods for acquiring, for example join a bike team, in order to receive discounts on bike gear etc… I generally may purchase a good I am interested in trying because of a sale, however I do not prefer to change my purchase habits because of a sale specifically. I would much rather pay .30 more for my favorite brand of coffee, but may purchase a few extra bags of my favorite coffee if they were on sale.

2.  What about the distortion caused by improvements in goods? Do you think that is a serious problem in measurement? Back in the 1970's my Dad purchased an early calculator.  It handled addition, subtraction, multiplication, and division. It cost nearly $100.  Phones have a similar challenge as do cars and even airport bathrooms.  If your raise last year was 2% and inflation was 2% did you break even? Or did your life improve?

Technology has exponentially changed over the course of the hundred years, and continues to do so at a pace that makes many pause to think what the next year will bring in discoveries. These improvements offer major challenges of measurement with the CPI, and the balance is already on the forefront of technology with new ways of measuring inflation being studied and launched, CPI undoubtedly will transform as we all have like the record player. Thought obsolete, but now cherished and valued as much as if not more than digital music. CPI may face challenges, but it will transform with the time and the balance in measurement will be tested through the technology, and modified, as the need for accurate measurement will concede to tradition. However, our text hinted towards the continued general accuracy of the tried and true methods, even with its own limitations. Consumer knowledge is also powerful, as we live in a time where we know, when we purchase a brand-new car and drive it off the lot, it’s value decreases exponentially. We know when we purchase a brand new i-phone, the next years model is going to be bigger, better, and more valuable. We know the computer we buy now, will be faster, cheaper, and more powerful next year, yet we weight all of these options out, and perhaps consider economic trends for our large purchases. Such as tariffs impending on Chinese appliances etc.

If my raise was 2% and inflation was 2% last year bottom dollar break-even occurred. However, if I was able mitigate my cost expenditure to less than the year before I came out ahead. For example say in the year prior to the raise, I occurred extra costs due to illness, injury, or other circumstance out of the ordinary, then the year of the raise I had a year with less cost, managed to get rid of one of my bills, then from my perspective though my other costs raised 2% along with my raise, I incurred less costs, so I was able to save more, however, if inflation continues and no raise continues, the extra savings will decrease in value.

Works Cited

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch10

1.  What is the difference between an intermediate good and a final good?  Why do we care?

An intermediate good is a product that is utilized for the completion of another product. For example, a lotion maker utilizes shea butter, olive oil, and distilled water to create their lotion. The shea butter, olive oil, and distilled water are all intermediate goods and are not counted in the GDP, however the lotion is the final good that is produced and is counted with the costs of all the intermediate goods contained within. There is one notable exception, if the lotion producer utilized the intermediate good as an inventory stock to produce lotion at a later date, then the intermediate goods would be counted as inventory investment within the GDP.

2.  Is GDP a good measure of well-being?  Why or why not?  What is missing?  Has what is missing changed over the years? (For example, if improvements in products are not counted, is that more important now than it was a few decades ago?)

GDP is both a good measure of well-being and not. Data shows that countries with higher GDP have a higher quality of life, longer life-span, higher education, and higher overall life satisfaction. However, GDP averages income amongst all peoples of a nation, and does not include the reality that incomes of all peoples within a high GDP nation are not evenly distributed. There are still disparities of unevenly distributed incomes amongst the peoples, not showing the differences between the ultra-wealthy, and the ultra-poor. GDP also does not include the value of environmental factors, value of goods and services produced at home, as well as the value of leisure. Other things GDP does not count are products that are re-sold, such as a used car, perhaps this used car was worked on to a condition that exceeded efficiency than when it was produced first. This improvement not only increases well-being of the environment (re-purposing and re-using) it also increases the well-being of the buyer and seller of this vehicle. GDP misses this important advantage, as the land of our economy becomes more and more focused on sustainable energy, and environmental practices.

3. What do you think of other measures such as Gross National Happiness pr Gross Progress Indicator?

I think it is important to be open minded to other measurements of success, progress, and happiness. Overall the GDP offers a concrete scientific way to measure the quality of production of a country, which through data proves that a higher GDP equals a higher quality of life. Yet, there are obviously missing pieces which must be taken into consideration prior to drawing complete conclusions. If one was to take a broad approach to include some of these missing pieces through GNH or GPI a more well-rounded picture may emerge in presenting information for policy makers to implement strategies that not only improve GDP, but overall wellbeing of their country.

Works Cited

Kagan, J. (2018, July 24). Gross National Happiness GNH. Retrieved from Investopedia: https://www.investopedia.com/terms/g/gnh.asp

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

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Macroeconomics Ch7

1.  Describe efficiency from the perspective of an economist.

Efficiency from the perspective of an economist is where all resources are allocated in a manner which total surplus is maximized. Total surplus is equal to the cost to sellers subtracted from the value to buyers.

2. Why are producer and consumer surpluses important in determining market equilibrium?

Producer and consumer surpluses are important in determining market equilibrium because when both surpluses are equal, it reveals the market equilibrium if we are observing a free market.

3.  Should market efficiency always be the goal of policy setters?  Why or why not? Is there a trade-off between efficiency and equality? If you don't like efficiency what is your preferred alternative?

Market efficiency should not always be the goal of policy setters, as many would agree that market equality is important as well. Market equality is the focus on distribution of economic prosperity throughout the society. I think it is important that both concepts are kept in mind when implementing economic policies. Granted an efficiency focused policy will grow an economy, an equality focused policy will then distribute the benefits more evenly for all, increasing the value and continue the growth cycle of the market. Many economists have worked under the ideas that there are trade-offs between efficiency and equality. However, recently there is a shift in thinking about the trade-offs between efficiency and equality. With greater equality producing economic growth the old thought patterns of the tradeoff for efficiency with equality is being rethought. I think policy makers should continue focusing on efficiency and equality as they develop policies that bear economic consequences. A more global approach to policies, will lead to a more sustainable holistic economic growth for all.

Works Cited

M.S. (2014, April 23). Inequality and efficiency The last casualty of the cold war. Retrieved from The Economist: https://www.economist.com/democracy-in-america/2014/04/23/the-last-casualty-of-the-cold-war

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

Okun, A. (2011, March 3). Equality vs. efficiency: Okun’s answer is … . Retrieved from The Incidental Economist: http://theincidentaleconomist.com/wordpress/equality-vs-efficiency-okuns-answer-is/

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Macroeconomics Ch6

A few years ago, there was a flurry of blog posts from economists on price controls and inflation in Venezuela.

Read this article from the Times: http://www.nytimes.com/2012/04/21/world/americas/venezuela-faces-shortages-in-grocery-staples.html?_r=1 (Links to an external site.)Links to an external site.

How does this relate to the theories from the chapter?

-      The article demonstrates the realities that people face when a government places a price ceiling on goods. Chapter 6 discusses the outcome of markets when a good has a price ceiling. In theory, if a price ceiling is above the equilibrium price, then the market is left unchanged. However, if a price ceiling is placed on a good that is below the market equilibrium, which is what Venezuela is experiencing, a shortage of goods result.

Now consider a different case.  After Hurricane Katrina speculators brought in bottled water but charged quite a lot for it.  What might have happened had price controls been imposed?  Where does the concept of fairness fit into this theory?

-      The bottled water that was brought in after Hurricane Katrina, and charged considerable amounts for, is a concept known as price gouging. Many states do have price gouging laws, placing price controls on items such as these. When these are placed, just like in Venezuela, shortages in supplies occur. As people will hoard products in anticipation before or after a disaster. This attitude of buying more than they need would lead to shortages where others may not be able to acquire the products at all. However, without price ceilings, an impoverished person may not be able to afford the water bottle, that they most likely need for survival. On both ends of this example, demand is not fairly met. Price ceilings reduce supply and demand still increases, and with free market reign price gouging occurs and all that necessitate the water, may not be able to afford their basic necessity for survival. A complicated issue that spans fairness and equality within a market. Perhaps a good solution is a price ceiling that is on a middle path, higher than usual price equilibrium of a good, just high enough to prevent shortages, but also in a range where vital life essentials are attainable by all (unfortunately, may be a utopian dream for the economic realities of disaster zones).

How is are the two disaster situations different?  Will supply and demand be affected in the same way? Why or why not?

-      The two disaster situations of Venezuela, and Hurricane Katrina differ because unlike Venezuela, Hurricane Katrina had a timetable in the sense, that economic normalcy was resumed after the storm passed (granted sometime after the literal storm passed), once the waters receded, and cleanup began, the economies started the journey back towards equilibrium based on supplies and demand curves normalizing post recovery. Whereas, in Venezuela, the government controls, aren’t lightening up, in fact quite the opposite, increasing the controls on goods and consumer spending is spiraling their once prosperous economy into a chronic state of hyper-inflation, and increasing the scarcity of resources. In both cases, supply decreases and demand increases, however with Venezuela, at this time, there appears no return to normalcy, whereas in Louisiana and Florida the economic normalcy returned once the areas that were devastated cleaned up and rebuilt their way of life.

Last, choose an article about increases in the minimum wage and comment on it using the theories from this chapter in your comments.

https://www.washingtonpost.com/news/wonk/wp/2018/01/11/what-does-a-15-minimum-wage-do-to-the-economy-economists-are-starting-to-find-out/?noredirect=on&utm_term=.60ea9a91cacf

-      Minimum wage is a price floor that is set for labor by governments. Its intended purpose is to create a higher wage for the common unskilled worker. Like price ceilings, if this number is set below the equilibrium price, there is no effect. However, if it is set above the equilibrium price the result is a labor surplus (unemployment increases). Economists looked at one minimum wage increase in the restaurant business of California where the wage went from “6.75 to $7.50 in 2007 and to $8 in 2008 were estimated to increase earnings in limited service restaurants slightly more than 10% but reduced employment by about 12%.” (Ingraham, 2018)Though, these findings are preliminary they demonstrate the effects of a price floor on the labor market when it creeps above the equilibrium.

Works Cited

Ingraham, C. (2018, January 11). What does a $15 minimum wage do to the economy? Economists are starting to find out. Retrieved from Washington Post: https://www.washingtonpost.com/news/wonk/wp/2018/01/11/what-does-a-15-minimum-wage-do-to-the-economy-economists-are-starting-to-find-out/?noredirect=on&utm_term=.60ea9a91cacf

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.

NEUMAN, W. (2012, April 20). With Venezuelan Food Shortages, Some Blame Price Controls. Retrieved from NY Times: https://www.nytimes.com/2012/04/21/world/americas/venezuela-faces-shortages-in-grocery-staples.html?_r=1

[macroeconomicscmc]

Macroeconomics Ch4

1. In many large cities you can now use your cell phone to call Uber or Lyft instead of hailing a taxi.  Would you expect this to affect the prices of taxi medallions (that is really the supply of taxis)?  Why or why not?  Talk about supply and demand curves in your answer. Make sure you can draw them!

Uber and Lyft have decreased the prices of taxi medallions. With the ease of anyone who has a safe driving vehicle, a clean license, and can pass a DOT physical, and voila you are your very own self-employed taxi driver. Gone is the hassle of working long hours for years, then purchasing a taxi medallion to finally achieve ownership of a taxi business. With Uber and Lyft people operate their own taxi business, and in doing so the demand for taxi ownership have decreased. Also, in this wake of decreased demand of ownership of taxi medallions, the other factor of business, the customer, is enjoying the convenience of calling a car through the touch of an app, the cost benefits of independent drivers as well as the overall the availability of drivers, have also compiled the decrease in the demand curve. This double decrease in the demand, have led to “medallions worth over a million dollars less than five years ago are now pegged at less than $165,000 after the consumer switch to ridesharing.” (Goldstein, 2018)Undoubtedly the equilibrium will come about with the supply curve shifting downward to the market equilibrium.

2. Can you think of an example where you watched the supply of a good or service change rapidly?  (For example, a new hotel or restaurant opened.)  Based on the chapter what would you expect to see happen? Why?

The biggest supply change I have noticed as of recent, are with the passing and enacting of the new liquor laws of Colorado. Now grocery stores, gas stations, and convenience stores, are allowed to resale alcohol that is over 3.2%. Increasing the supply of alcohol products to the consumer allows consumer results in a shift of the supply curve to the right. This increase in supply will lead to a surplus of alcohol, which in turn will lower the prices, to increase demand.

3. Give another example of a concept from this chapter.  For example I used AirBnB to rent an apartment in San Francisco a few years ago.  How did AirBnB affect the supply of short term room rentals in San Francisco? How about the supply of long term rentals?

My favorite buzz topic of Breckenridge is parking. Talk about a constant hot topic on the lips of any local, as well as a perfect example of Supply and Demand. This issue is loaded with many factors adjusting the curves of supply and demand, but to keep it simple, I will utilize the debacle of recent, our International Snow Sculptures of 2019. In previous years this event was a two-week long affair, and the town would occupy an entire parking lot to build and maintain several international teams’ artwork out of snow. Due to the pressures of supply and demand of parking spaces, the TOB has decided to hold the event for only ten days, with only one weekend for viewing (versus two weekends of years prior).

On paper, this choice seems like a great idea, moving the supply curve of parking to the left, for less time, only sacrificing the parking lot for one weekend. However, what the town forgot to consider was the demand curve of tourists wanting to partake in the event, (that was so well advertised, with the promise of fireworks). The demand curve exponentially increased in this year’s event. The frenzied tourist had only one weekend to come into Breckenridge to enjoy this artistic event. Pressured by the limited supply of this event, and the increased demand, and then mixed with a perfect storm (snow that is) Breckenridge was close to lock down with traffic, and not only a shortage of parking, we also experienced a lack of emergency services (due to traffic gridlock), as well as borderline chaos. With over 60,000 people traveling through two highways to enter the valley, our town was under fire of the consequences of an exponential decrease in supply (of parking as well as time for enjoyment of the event) and increase in demand (from tourists wanting to enjoy the artwork and fireworks). Long-term these affects have not been assessed, but the equilibrium shift will occur, to balance out the event for future, will the town increase the supply of parking or time? Or perhaps decrease the demand of advertisement, or entertainment? Or perhaps the consumer disgusted with the experience of limited supply, will decrease their own demand of the Breckenridge experience? All to be seen in the coming years.

Works Cited

Goldstein, M. (2018, May 9). Cost and Benefits of Disruption. Retrieved from Forbes: https://www.forbes.com/sites/michaelgoldstein/2018/05/09/uber-and-lyft-the-cost-and-benefits-of-disruption/#5d6f8854dfcb

Mankiw, N. G. (2018). Macroeconomics.Boston, MA: Cengage Learning.