April 28, 2008

AP Economics Study Guides

Posted in AP Exam at 6:41 pm by davidprudente

Check out Jason Welker’s Wikinomics study guide page for both the Macro and Micro exams.

April 24, 2008

Unexpected Price Increases

Posted in Uncategorized at 5:33 am by davidprudente

This story from CNN provides an excellent example of the consequences of unexpected price increases.rice

April 17, 2008

Capital Flow Chart

Posted in AP Exam, International Trade, Net Capital Outflow, Test Info at 7:00 pm by davidprudente

Interest

Rate

Capital

Flows

Demand for

Currency

Value of Currency

Imports

Exports

In

Appreciates

Out

Depreciates

Remember, This chart does not work for Capital Flight or Trade Barrier Scenarios

What happens when Interest Rates Change

Posted in AP Exam, Test Info at 4:55 pm by davidprudente

Here’s the written explanation for the Capital Flow Table:

Scenario I: Increasing Interest Rates.

As Interest Rates rise in the United States, Capital Flows In to the country because the higher interest rates are an incentive for foreign capital. As capital flow in to the nation, the Demand for the Dollar Increases, as demand for the dollar increases, the Value of the Dollar Appreciates. When the dollar appreciates, goods made in the United States appear more costly to domestic and foreign consumers. Therefore, Imports Increase while Exports Decrease.

Scenario II: Decreasing Interest Rates.

As Interest Rates fall in the United States, Capital Flows Out of the country because the lower interest rates are a disincentive for foreign and domestic capital. As capital flow out of the nation, the Demand for the Dollar Decreases, as demand for the dollar decreases, the Value of the Dollar Depreciates. When the dollar depreciates, goods made in the United States appear less expensive to domestic and foreign consumers. Therefore, Imports Decrease while Exports Increase.

April 14, 2008

How Inflation Affects Society

Posted in Inflation at 6:49 pm by davidprudente

If there were any questions this year as to how unexpected inflation can impact a society, I think we have an answer. This article from CNN highlights “Riots from Haiti to Bangladesh to Egypt over the soaring costs of basic foods.”

April 5, 2008

A Couple of Articles

Posted in International Trade, Micro finance, Net Capital Outflow at 9:46 am by davidprudente

Today’s New York Times had a couple of interesting articles. First, this article deals directly with what we are discussing in chapters 29 & 30, Capital flows. I think it provides a nice overview of the topic while relating it to real world investors and the problems they face.

Second, is an article about Micro finance (lending small amounts of money to the poor to end poverty). I’ve been following this for a while now, and sooner or later you knew someone was going to try and make this into a business model to make money. The point of micro lending is to provide enough money for people to start their own business and pay back the principle and interest at reasonable rates that do not make them, in essence, tenant farmers.

April 3, 2008

Zimbabwe Update

Posted in Articles at 4:05 pm by davidprudente

Latest news about a crackdown in Zimbabwe from the New York Times.

250px-locationzimbabwesvg.png