Chapter 13 Reflection

Private savings impacts investment since people use their disposable income to invest. If there is no income after basic needs are met, then investment will not occur. It is important for individuals to save so that they can provide for their needs during tough times. Accumulated savings can also help an individual increase their standard of living. Tax policies affect savings rates since a dollar paid in public taxes is a dollar no longer available for private savings.

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Chapter 22 Reflection

Inflation and unemployment have an inverse relationship. You can ’t have both become lower at the same time, but policymakers can decide acceptable threshold levels which will then inform which is more of a priority to pursue. It is good that people work at jobs, because then the GDP rises, which improves the nation’s economy as they become more efficient. But you see, a s more people get jobs, their income rises, and then their consumption also increases. Increased consumption means that prices generally rise as the goods go to the highest bidder. Workers in turn will demand higher wages in order to keep up with these rising prices, or inflation. So in the end, as unemployment decreases inflation will increase. I ’m not so sure that there really is a trade-off, as it seems to be more of a feedback cycle rather than something that can be legislated. And this feedback cycle seems to have a historic pattern as well. But overall, neither factor alone totally conveys the quality o...

Chapter 17 Reflection

Inflation is an increase in the money supply. Prices appear to become higher because currency loses its value, so it requires more money to buy the same item. People may begin to hoard groceries in order to get the most bang for their buck. This can create a feedback loop as people seek to spend their earnings rather than allow it to depreciate. Deflation is a constriction of the money supply. Prices appear to become lower, and people may delay their purchases in order to save money... so the economy stagnates. In addition, consumers have less disposable income after they have paid for the necessities because their wages are typically smaller. If wages are smaller, then any pre-existing debt becomes more difficult to pay off. This can be a dangerous position because the USA's economy increasingly relies on debt.

Chapter 18 Reflection

Seeing how the flow of goods and services is related to the flow of capital in international markets is interesting. Selling a good to a foreign party increases your exports, and when you buy foreign products with the foreign currency you have received you are increasing imports. The question of whether domestic citizens or foreign people are investing more heavily will determine whether there is a trade surplus or deficit. But this is a multi-faceted label, and more factors must be observed in order to determine how it affects a nation's well-being. I'm curious to know more about the economic changes that occurred when the EU countries initially adopted the Euro. How did the differing exchange rates determine how many Euros each country would be given? How did that affect their ability to grow?

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