James+K

Money!!!: The Federal Reserve system requires all depository institutions to keep 10% of the funds deposited in transactions accounts as reserves. The currency held in the bank as reserves is not counted in the money supply. Many people I'd say believe that the 10% reserves are to insure that their will be cash at hand to meet withdrawal needs, but in truth reserve requirements a

re used to help the FED control the money supply. For example, in the case of counterfeiting, $1000 in phony bills could lead to chain expansion process where we may end up with a $10000 increase in the money supply due to the expansion of counterfeit bills by the reserve ratio. A small amount of counterfeit money may cause a serious change, but it also indicates that the FED could influence the change in numerous ways. For one, the FED could and simply deposit it into a bank and the money expansion would increase the FED's deposit with with money that isn't counterfeit. The FED could also raise or lower the reserve requirements for depository institutions to increase or decrease the money supply. Another policy tool involves the discount rate, which is the rate of interest the FED charges when it makes loans; if this rate is lowered, banks will want to borrow from the FED and this will in turn increase bank reserves. The money supply will increase by a multiple of the borrowings from the FED. Good explanation James. Hadn't thought about the impact of counterfeiting before. 10/10 -SW

Fiscal Policy:

America today is rising out of its economic slowdown from expansionary fiscal policy, as we saw with the March 7 Idaho Statesman article on the Unit 3 test Stanwiens gave us. Over the past few decades, our presidents have shown considerable discrepancy in their fiscal policies, which in turn affect their nice image towards the American public. For example, from the cartoon above we see Clinton, the only one o the five to create a $200+ billion surplus for the US economy. He was fortunate because his era experienced technological innovation fueled by the internet as well as unprecedented growth in income and tax revenue during the 1990s. Clinton put a considerable dent in the country's $3 trillion deficit. On the other hand, with the fiscal conservative George Bush to follow soon after, it seems those conservativesare the bane of the US economy. Budget surplus was exaporated and $6 trillion were added to our national debt over the next 8 years. Our deb today stands at $9.3 trillion and budget deficit over $400 billion. This is the largest gap between tax revenue and gov spending in US history. No wonder McCain didn't win the election against Obama. Actually, your numbers are a little low, they are even higher now. But, you point is good. Reps want everyone to know that Dems are the big spenders. No president has EVER spent less than the previous one. Clinton simply benefited from Bill Gates and the Msoft super expansion with SRAS shifting out big time. Nice job. 10/10

This cartoon portrays the Uncle Sam at the bottomost point of a roller coaster ride, which is representative of the US economy in the trough of the business cycle. The average growth of the US economy is just over 3% a year, but rather than maintaining an average rate, the economy tends to grow fast for a few years and then show negative growth for some other years. These fluctuations depicting contractions and expansions are recurrent but don't conform to a uniform schedule. Thus is the character of business cycles. Economic forecaster get lower grades for accuracy than weathermen. Anyways, during the expansion times, price levels rise and thus GDP and employment rises to satisfy the demand for workers. It's the other way around for a recession, as Uncle Sam shows with his empty money bag in the cartoon above. 10/10 Yes, an unfortunate thing about economics....we don't get it right a lot of the time. Reality is different than economic theory. Oh well, we give it our best shot.

Unit 3 First of all, the graduate student is considered unemployed because he is jobless and actively searching for a job. I see this image as a mix of both frictional and structural unemployment, in others just the natural unemployment. Frictional because the graduate student is obviously in a period where he is trying to transition and search for the best job possible for him. What makes it funny is that a student with a master's degree should most definitely be able to get a job a lot better-paying and respectable than flipping patties. However, I assume that the unemployment must be so high in a terrible economy that even those with Ph.D.s battle for those low-paying jobs. Because the skills of the graduate student with the master's degree is just not up to par with those with Ph.D.s, this is structural unemployment because the skills of the unemployed individual is not enough in the eyes of the owner for the job. 10/10 Nice application. It goes to show that higher education will pay off in the economy in the long run.

Unit 2:

The picture above can be used to demonstrate the concepts of taxation, the laffer curve, and externalities. Many individuals view tobacco taxes as an appealing way to raise revenue because unlike most taxes which tend to discourage productive activities, tobacco taxes would discourage socially inefficient activities. Therefore, I would suggest a non-symmetric laffer curve because I believe taxpayers would be willing to pay more taxes on tobacco than other products because they believe they are making the moral decision to prevent a bad practice. Such a tax would correct the negative externalities resulting from the users of tobacco, such as second-hand smoke, disgusting teeth, nasty smells, etc. However, the tax on tobacco would lead to a lower quantity demanded, leading to overall less users and therefore "killing" the job of the grave digger (for people who died from tobacco use, lung cancer). Good point James. I agree that there are factors that would change how the Laffer curve works. The issue of what exactly the tax is on is important. However, I believe Laffer was going for income taxes instead of excise taxes. Nevertheless, you make a good point. 10/10 -SW

Unit 1: [|This is another wikispace] that delves into the great concepts of trade as well as absolute and comparative advantage. Not only does it define these terms, it gives examples as well as a video reference in which these concepts are throughly explained.

[|China and America Comparative Advantage] The link above shows an image depicting comparative advantage. Wikispaces will not let me actually upload the picture for some reason. Anyway, it shows an individual representing the nation of China shaking hands with another person epitomizing a foreign nation like the United States with money flowing around. This picture goes to show that many nations seek labor for production from outside their their own land because today many manufacturing or textile jobs are more cheaply achieved in foriegn nations. That is, the opportunity cost for these jobs are greater in the US than in China, so we seek to outsource these occupations. That's why we see the tag "Made in China" in most toys and trinkets and why clothing bought at your local Walmart shows "Made in Vietnam." Countries seek the greatest economic advantage, and great nations like the United States would rather make aircraft than clothes.

The film "Outsourced" clearly demonstrates these principles. Well done James. Great explanation and cartoon. 10/10