March 28, 2008

Correction to Chapter 29 Reading

Posted in Assignments at 7:22 am by davidprudente

Hi everybody,

I just realized that Mankiw is using a term in chapter 29 that is not commonly used. Mankiw uses the term Net Foreign Investment to determine the nature of a countries foreign trade. The more acceptable term for this is Net Capital Outflow.

So, where ever you read Net Foreign Investment, you should replace the term with Net Capital Outflow. They mean the exact same thing – NFI is just a term that Mankiw was trying to get used as the common term; he was not successful.

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February 25, 2008

Homework Reminder

Posted in Assignments at 4:44 pm by davidprudente

As I mentioned in class, you should read pages 733-744 in chapter 32 for tonight. In addition, the John Maynard Keynes test will be Friday.

February 22, 2008

Lovin’ The Rain!

Posted in Aggregate Demand, Aggregate Supply, Assignments at 9:31 am by davidprudente

Well, here we are again; home in the rain. I hope you all enjoy your long weekend and you are being safe and making smart decisions. One smart decision would be to check out Mankiw’s book website and take the online practice quiz for chapter 31. You’ll need to select the AS/AD chapter from the drop down box. Then select Tutorial Quiz from the menu on the left. In this version of the book, the AS/AD chapter  is chapter 20. Remember the 40 question quiz is Monday. Enjoy your weekend.

February 13, 2008

SRAS Shift Discussion

Posted in Aggregate Supply, Assignments at 3:45 pm by davidprudente

Hey Folks,

I’m glad to see many of you working on your day off. Juan Vega and I exchanged email’s earlier and I thought the discussion might help.

Juan Asks:

“On page 722, Mankiw says that when the AD curve decreases because of a wave of pessimism, the quantity of output and the price level decrease. According to Mankiw, this is a recession because output has fallen and therefore unemployment has risen. I understand this, but then he goes on and says that without intervention by policy-makers the economy will remedy itself when perceptions, wages, and prices change. My question is, how can the SRAS curve shift to the right when the price level is low? Doesn’t a low price level lead to cuts in production due to perceptions, wages, and sticky prices, as explained by Mankiw on page 717?”

My Answer:

Good question. Remember that the short-run fluctuation is a deviation from the natural-rate of output in the long-run. So the natural tendency is to shift towards the long-run aggregate supply over time. For example, let’s say we are currently in a recession and our unemployment rate is 8%. Prices and output would be low in this situation (think about the graph). During a recession, businesses would be trying to lower output and cut costs. One way they do this is by letting their inventories decrease. At the same time, consumers have generally put-off major purchases (cars, houses, other durable goods) because they are concerned about a recession. But after awhile, some major purchases can no longer be put off (if you need a new car for transportation you have to buy one now rather than later). As more and more consumers begin purchasing goods out of necessity, businesses start seeing rising demand for their goods. So businesses start to increase their output. As this occurs, they hire more workers, who inevitably spend their wages. As more and more workers begin being hired and consequently spend their wages, more and more businesses increase output and hire more workers. Soon the unemployment rate begins to decline (gravitating towards the natural rate of output or full employment level). Now we see that our SRAS begins to shift right towards the LRAS.

February 2, 2008

Unit Exam Tuesday

Posted in Assignments at 10:46 am by davidprudente

Just a reminder that the unit exam will be Tuesday. BE sure to review chapters 25, 27, & 28. Remember to review the graphs (Market for Loanable Funds, Money Supply, & Investment). Have a great weekend!

January 25, 2008

End of Semester

Posted in Assignments at 4:07 pm by davidprudente

We finished the first semester today. I will be entering your grades by Monday for the final semester grades.

I have assigned chapter 28 to be read this weekend. There will be a Quiz on Tuesday.  Enjoy your weekend.

January 23, 2008

More Extra Credit

Posted in Assignments at 7:24 pm by davidprudente

Adam Tsao posted this video ealier in the week…sorry for the delay. Well done!

January 18, 2008

Monetary Policy Cheat Sheet

Posted in Assignments, Monetary Policy at 3:26 pm by davidprudente

Today, in class, I handed out this chart which simplifies monetary policy choices. If you missed today, please download the chart and memorize it. It will come in handy.

Also, I want you to consider how changes in interest rates affect Investment spending. I will introduce a graph next week that considers this point.

January 16, 2008

Extra Credit Assignments begin to come in

Posted in Assignments at 6:19 am by davidprudente

Here’s an extra credit video one student produced that let’s you hear economic views directly from several republican candidates.

January 10, 2008

Extra Credit

Posted in Assignments, Fiscal Policy at 6:13 am by davidprudente

As the end of the semester approaches, I thought some of you would like an opportunity to earn extra credit. The assignment is to compare and contrast three presidential candidates economic plans. You can do this by first going to the candidates web site and copying their stated proposals. Second, read and analyze their proposals and compare and contrast them with the other candidates proposals; how are they similar, how are they different. Third, use some form of media to communicate the candidates positions. And finally, be sure to conclude with your personal analysis of the candidates proposals. This project is due by 1/17/08.

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