Allie+K



Interest rate (i) is: There are short term and long term interest rates. Interest rates fluctuate due to multiple factors, or barriers, such as, the amount of risk that is involved, the length of time an asset is held/time until maturity, and federal reserve policies. The higher the risk is the higher the interest rate is going to be. The longer an asset is held is also going to increase the interest rate. And contractionary federal money policies (less M1) also causes higher interest rates. The opposite is true if there is low risk, assets aren't held for very long, and expansionary federal money policies (more M1) all lead to a lower interest rate. The better the economy is doing, the higher the demand for money is, the higher the demand for money is the higher the interest rates are going to be. Yes, now tell me about your two pictures here. How do they relate? Connect to Money Tree and LF graph? 8/10
 * the opportunity cost of holding M1 (savers)
 * The $ cost of obtaining money (borrowers)

In order to "fix" the economy we need to increase one of three things. One is consumer spending (C). Another is investment (I). And the third is government spending (G). If we increase or target I then BOTH aggregate demand and aggregate supply will increase. This is the best situation possible. When both aggregate demand and supply increase both of their graphs move. Which leads to an increase in GDP while prices remain the same. In the Investment Demand Curve as interest rates go down investments go up which in turn leads to an increase in GDP. There are multiple things that will shift the investment demand curve 1. Acquisition, maintenance and operating costs: - When cost is lower the rate of return increases shifting the curve to the right. The curve would shift to the left if cost is higher because the return rate is decreased. 2. Business Taxes - When business taxes are decreased expected profit is increased which makes the curve shift out to the right. If business taxes are increased then then expected profit decreases which makes the curve shift to the left. 3. Technological change - When technology advances it increases productivity which makes the curve shift to the right. Nice job Allie. Lots of good learning here. 10/10



The Phillips curve is a model of the correlation between the uneployment rate and the rate of inflation. The rate of inflation and the rate of unemployment are inversely proportional. The higher the unemployment rate the lower the inflation rate and the higher the inflation rate the lower the unemployment rate. When business are unable to maintan the workforce that they have they lay people off. When workers are laid off they don't have as much income to spend. When consumer spending drops businesses aren't able to charge as much as they could before causing inflation rates to drop. When things start to pick up, companies are able to hire more workers. Workers then have more money to spend which makes it possible for businesses to charge more which means that inflation is higher. 8/10 Yes. Now, go further with some analysis or further comment. You know enough now to provide something else too.

Unemployment is an extremely large issue in our economy. The picture above is a representation of cyclical unemployment. There aren't enough jobs for everyone who wants one to have one. A lot of this is happening in our economy today. Kids are coming out of school looking for a job but they are unable to find one because adults are taking jobs that used to be given to kids. Adults are being put out of work and forced to take jobs that they otherwise wouldn't take. In an ideal economy we would have full employment. Full employment only includes frictional unemployment. Frictional unemployment is when people are in between (looking) for jobs. We can never have 0% unemployment which is why only including full employment is ideal. Even though there is still unemployment, people are looking for jobs and when they find one that suits them they will no longer be unemployed. 10/10 good analysis and interpretation. Sad but true.



An externality is the spill over effect on a third party that isn't directly involved. When someone decides to text while driving they aren't taking into consideration the other drivers and people on the road. If they were to crash into someone it would be a negative externality. The person they hit wasn't directly involved with them. They weren't the person who was texting and they weren't the distraction that caused the accident. They just happened to be in the wrong place at the wrong time. The person who had been texting and driving hadn't been thinking about what could happen if they answered that text while attempting to keep their focus on the road. All the factors put together resulted in a negative externality of an innocent person getting hit. Good explanation and example. What's the "solution"? Is there a market solution besides outlawing it? 9/10 -SW

The term was coined in 1914 by [|Friedrich von Wieser] in his book "Theorie der gesellschaftlichen Wirtschaft". [|[4]] However, in 1848 [|Frédéric Bastiat] described this concept in his essay [|What Is Seen and What Is Not Seen]
 * Opportunity** **cost** is the cost of any activity measured in terms of the value of the next best alternative foregone (that is not chosen). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several [|mutually exclusive] choices. [|[1]] The opportunity cost is also the cost of the foregone products after making a choice. Opportunity cost is a key concept in [|economics], and has been described as expressing "the basic relationship between [|scarcity] and [|choice] ". [|[2]] The notion of opportunity cost plays a crucial part in ensuring that scarce resources are used efficiently. [|[3]] Thus, opportunity costs are not restricted to monetary or financial costs: the [|real cost] of [|output foregone] , lost time, pleasure or any other benefit that provides [|utility] should also be considered opportunity costs.

//The opportunity cost is what you give up when you choose another option. If you are hungry and you eat a slice of pizza the opportunity cost of that slice is that you are no longer hungry. If after that one slice of pizza you choose to have one more slice of pizza the opportunity cost of that next slice would be that you may become too full to function therefore losing out on the opportunity to go have ice cream with your friends. Allie, not quite. The OC is the __value__ of the other thing, not the description or cost. For example, the OC of eating a slice of pizza is the benefit of eating something else (hamburgers?). Besides putting a definition from the web, could you find an example? 6/1 //