Scott+K



As many of us are about to head off to college, we will learn more about things known as loans. Loans are borrowed money. The borrower agrees to pay back the full amount plus some. The extra amount is what's known as an interest rate. Interest rates can vary widely from person to person based on several factors. These factors include: I.)Risk II.)Length of time III.)Federal Reserve policies A student such as myself is a high risk, we are young and don't have any credit or earn very much. There is a chance that we won't pay back our whole loan. On the other hand, someone such as StanWiens who has hopefully built up a good credit score and has a stable job will be less of a risk. Therefore, their interest rate will be lower. If a loan is spread out over a long time, the interest will be high since the loaner can't loan that money to other people. The Feds can control how much money is in circulation. If there is a lot of money out there, interest rates will have to be low to attract potential borrowers. If there isn't a lot of money, interest rates can be high due to high demand accompanied with a low supply. Good review of this Scott. It is important to know and to manage over your lifetime. Try to always borrow money at low interest rates. It's the "price" of money. 10/10 -SW

Unit 4 Fiscal Policy is carried out by the President and Congress. They have a "tool Belt" or a variety of tools to help repair the economy. These tools are Government spending and taxes. This book clearly goes into an in-depth explanation of the government's different tools. Seriously though, the tools can be used in very different ways. A conservative might believe in the "Trickle Down" effect. This is when the government offers tax breaks to the Rich in hopes that they will re-invest the money in their businesses. They can hire more employees or buy new equipment. Each of these will have a positive effect on GDP. The more Liberal option is to reduce taxes for all, while increasing Government spending. This will obviously lead to a governmental budget deficit since they are spending more then they are bringing in. The argument is that it is better in the long run if the government goes into debt through this method then to do nothing. Keynesian believes that is best for the government to intervene by either of the two methods mentioned above, while classical economists want the government to just have a balanced budget and stay out of the economy as much as possible. You had me for a moment with the book. Thought I could get a new "read." Which do you ascribe to? 10/10

Unit 3 Part dos We've been learning about aggregate supply and demand. These are the total supply and demand of an economy. GDP is found from the crossing of the AD and SRAS curves. We can also determine unemployment from this if GDP is either high or low. If AD shifts either direction, there is some good and some bad. for example if AD were to shift to the left it would cause a recession. The good is prices go down, but the bad is that GDP goes down and unemployment goes up. If it shifts to the right,which is called Demand Pull Inflation. Prices go up (the bad), but GDP goes up and unemployment goes down. Now if SRAS shifts, it is either all good or all bad. Stagflation (yes that's a real word) aka Cost-Push Inflation is caused when the SRAS curve shifts to the left. It is the worst case scenario. Prices go up, GDP goes down, and unemployment goes up. The alternative is if the SRAS curve shifts to the right. This is a Super Expansion. It is all good news. Prices go down, GDP goes up, and unemployment goes down. In the picture the economy is in extreme stagflation. One possibility that caused this was a rapid growth of the money supply combined with high levels of taxation on capital. 10/10 Yes, but could this line also be caused by a Demand driven recession too?



Unit 3: Unemployment is when someone is out of work, but is currently looking for a job. It doesn't count if someone has quit looking or never looked in the first place. Lets take this storm trooper for example. His job ended with the fall of the empire, but he is currently in the process of looking for a new job. He is applying to for jobs around town and filing for unemployment. The time he has been looking for a job is called frictional employment. The death star was destroyed in 1977 so it's amazing that this guy hasn't become a discouraged worker. A discouraged worker is a worker that has simply given up looking for job. Therefore, they aren't counted in the unemployment rate. Although the economy will never reach 100% employment, full employment is considered around 3-6%. Some people will choose not to work while others are currently switching jobs. Kids fresh out of college or high school will also be looking for jobs. The lowest unemployment rate ever in the US was 2.5% in May, 1953. 10/10 Well done Scott. Love the picture. You nailed it when you said that he's been looking since 1977!

Unit 2: The Laffer Curve is a curve that shows how government revenue responds to a change in the percentage of a tax. At a 0% tax, the government would raise any for the obvious reasons. At a 100% tax rate, there'd be no incentive to work, thus the government still wouldn't raise any money. That means that there is some mystical number that falls in between the two that will allow government to maximize revenue. There's one problem. Everyone has their own idea on what the tax rate should be. I believe that Laffer made a mistake when he drew his curve. He really meant to draw it like this:

This should be the correct way to draw the curve, because no one knows where the correct rate is. Conservatives believe that we already pay too much in taxes and that if the government lowers, then the revenue it raises will rise. While liberals tend to have the opposite view. In the end, it's next to impossible to know the correct tax rate. The only way to figure it out is with trial and error, but many Americans would not like the governemnt constantly changing its tax rates. Ok, that's pretty hilarious! Where did you find this? Or did you make it up? 10/10 -SW

Unit 1: In [|economics], the **law of comparative advantage** refers to the ability of a person or a country to produce a particular good or service at a lower marginal and opportunity cost. Even if one country is more efficient in the production of all goods ( [|absolute advantage] ) than the other, both countries will still gain by trading with each other, as long as they have different relative efficiencies. For example, if, using machinery, a worker in one country can produce both shoes and shirts at 6 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts in an hour, each country can gain from trade because their internal trade-offs between shoes and shirts are different. The less-efficient country has a comparative advantage in shirts, so it finds it more efficient to produce shirts and trade them to the more-efficient country for shoes. Without trade, its [|opportunity cost] per shoe was 2 shirts; by trading, its cost per shoe can reduce to as low as 1 shirt depending on how much trade occurs (since the more-efficient country has a 1:1 trade-off). The more-efficient country has a comparative advantage in shoes, so it can gain in efficiency by moving some workers from shirt-production to shoe-production and trading some shoes for shirts. Without trade, its cost to make a shirt was 1 shoe; by trading, its cost per shirt can go as low as 1/2 shoe depending on how much trade occurs. The net benefits to each country are called the gains from trade.

Comparative advantage was first described by [|David Ricardo] who explained it in his 1817 book // [|On the Principles of Political Economy and Taxation] // in an example involving England and Portugal. [|[4]] In Portugal it is possible to produce both [|wine] and [|cloth] with less labor than it would take to produce the same quantities in England. However the relative costs of producing those two goods are different in the two countries. In England it is very hard to produce wine, and only moderately difficult to produce cloth. In Portugal both are easy to produce. Therefore while it is cheaper to produce cloth in Portugal than England, it is cheaper still for Portugal to produce excess wine, and trade that for English cloth. Conversely England benefits from this trade because its cost for producing cloth has not changed but it can now get wine at a lower price, closer to the cost of cloth. The conclusion drawn is that each country can gain by specializing in the good where it has comparative advantage, and trading that good for the other.

In the end. Countries are always better off trading. They can focus their energies on the most efficient and productive endeavor. They can then trade what they produce to another country. That country might have an item that would of been costly to produce. It evens the playing feild for all countries. Scott, is this the only part where you comment? What is your thoughts and ideas and what is web content. Probably need some more comment to make this top notch. 8/10