Chapter 32

I would give this chapter a 1.5 out of 3. This chapter talked about a new market, the foreign currency exchange market. We learned before that the loanable funds market is saving=domestic investment + net capital outflow. We learn that interest rates can have a big affect on this market because of the principles of supply and demand. The difference is that many variables in this chapter affect more than just one market. If you want to get foreign goods then someone is going to have to change your money into that foreign currency, which increases supply in the foreign currency market and increases demand for that foreign currency. The real exchange rate is what balances this market. Net capital outflow doesn't depend on the real exchange rate because the people who invest will eventually turn their investment back to their own currency at the same lower valued amount.

Chapter 31

I would give this chapter a 1.5 out of three. This chapter introduced us to open or global economies. Previously we had kept the economies closed for simplicity's sake but now we look at a variety of factors concerning them. These include net exports and net capital outflow. Net exports is the value of the goods exported by a country minus the value of the goods imported by the country. Net capital outflow is the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreign residents. Foreign assets can either be a direct or portfolio investment. Net capital outflow can be influenced by a variety of factors including the real interest rate on foreign and domestic assets, perceived risk, and government policy. Net capital outflow is always equal to net exports.

Chapter 30

I would give this chapter a 1.5 out of 3. Most of the material intrinsically makes sense to me although it is a little less interesting than normal. The basic idea of the chapter was to explain inflation; what it affects and how it happens. The general idea was that inflation is the result of monetary policy and that it didn't have an affect on real variables in the long run although it did on nominal variables. The velocity of money represents how fast money changes hands in the economy. Despite inflation economic velocity is relatively stable. Hyperinflation is when inflation is over 50% and results from the government printing to much money. As they need to pay for various goods and services countries may succumb to hyperinflation. This is called the inflation tax. Inflation doesn't necessarily have to be bad.

Chapter 29

I would give this chapter a two out of three for difficulty. There was a lot of material introduced in this chapter although nothing was inherently difficult to grasp in particular. I learned about how our monetary system works. Things like how transactions are facilitated and how much money is in the money supply. The reason why we are able to use money as a means of exchange is because people put trust in the future value of the money. Our currency is intrinsically worthless (other than the penny) and so it's important that people have trust in the government and thus the money. Using currency is much more efficient than trying to use items or services to barter. The money supply can also be increased or decreased through the sale and purchase of government bonds. This is one way to control inflation.

Chapter 28

I would give this chapter a 1.5 out of 3 because while the majority of the material was easy to digest, it was a very long chapter. There are a lot of things to know about unemployment and why it happens. Something I still will have to memorize is all of the different unemployment statistics the government puts out. In this chapter I learned about long term versus short term unemployment and how the majority of unemployment is short term but it is the long term unemployment that is the greatest concern. I learned about the debates of unemployment insurance and unions as well. Both can distort the labor market from equilibrium which can in turn create inefficiency. Likewise there can also be advantages to having wages set above equilibrium as well.