Macroeconomics and Money

1. If an economy produces final output worth $5 trillion, then the amount of gross

The figure below shows a portion of a consumer’s indifference map, and a budget line. The consumer’s income is $1,200 and the price of Y is

Money, it certainly does make the world go round, and the reason it is able to do so, is because people have trust in this little piece of paper. Around the globe there is no piece of paper that inspires more confidence. Officially, the US Dollar bills are Federal Reserve notes. Every note that is spent or received is part of a complex organization known as the Federal Reserve System. The Federal Reserve System is the integral component that keeps the American banking system afloat. It is, in essence, the governing body of banking and is responsible for many policies, laws, and regulations that have shaped the American banking system into what it is today. This institution has garnered a lot of support, as well as faced a lot of backlash in times of financial turmoil. However, observing the facts and analyzing the history of the Federal Reserve System will show that is has largely been a positive force in America. The Federal Reserve System plays a large role in both the national and world economies and is therefore heavily scrutinized. Under such scrutiny, one can find that a positive and significant relationship exists between the Federal Reserve System and the economy because of the policies the Federal Reserve enacts, the Federal Reserve’s regulation of interest rates, and the Federal Reserve’s response to crises in direct connection to economic stability.

There is nothing as influential and powerful as the concept of money. As a medium for exchange, money is value given or received in exchange for anything of value. Because money stands in place for value, why is it that gold has been the scale for evaluating money throughout history? Ted Cruz, in a Republican Presidential Debate, answered a question regarding monetary policy. He thinks “the Fed should get out of the business of trying to juice our economy and simply be focused on sound money and monetary stability, ideally tied to gold” (Cruz 2015). Cruz aligns “sound money” to gold because gold stabilizes pricing and reduces inflation percentages over the long run. The problem with

The terms medium of exchange. store of value (purchasing power jumping time segments), and unit of account (quoting prices) were the terminology utilized on page 190 of chapter ten. After this terminology, the section commodity and fiat monies was written. The functional weight from Principles of Macroeconomics is that commodity monies are tangibly traded with the use in in realization and fiat monies “{are} items designated as money that are intrinsically worthless” (p. 191). After the section on commodity and fiat monies concluded with a summation regarding currency debasement, Case, Fair, and Oster listed two equations for transaction money and broad money. The transaction money equation was M1 = currency held outside banks + demand deposits + travelers’ checks +

The lower-case c in the equation represents the marginal propensity to consume (MPC). As the declining house prices reduce households’ intention to spend a larger proportion of their income, the marginal propensity to consume decreases.

How does money affect our house hold? What do we really spend all our money on? The home, education, clothes, vacation, eating out and so on. Americans spend money on things that they do not need. Many of us, including myself are guilty of walking into the mall and we saw that dress or sneakers that caught our eyes and we bought it. Months or a year later if we look into our closet we see that dress with the tag on and that $70 pair of sneakers in the box still unworn. I would think that the answer would be our house and education for our children. This is called the urge to spurge. It is obvious that Americans are known to spend a lot of money daily. They tend to buy things that they do not need.

At the beginning of the year, an audio engineer quit his job and gave up a salary of $175,000 per year in order to start his own business, Sound Devices, Inc. The new company builds, installs, and maintains custom audio equipment for businesses that require high-quality audio systems. A partial income statement for Sound Devices, Inc., is shown below:

A) The taxes paid by the poor should be reduced in order to improve the income distribution in the U.S.

Monetary Policy, in the United States, is the process by which the Federal Reserve controls the money supply to promote economic growth and stability. It is based on the relationship between interest rates of the economy and the total supply of money. The Federal Reserve uses a variety of monetary policy tools to control one or both of these.

Did you know that in 1975 American adults were asked to identify the elements of the good life, only 38 percent chose a lot of money, compared to a “Whopping” 63 percent who chose a lot of money in a survey in 1996. This is not good for America, because people just want more and more money for themselves. Americans spend 70 billion dollars on lottery tickets and that is surprisingly atrocious. Too much money is a bad thing. with too much money you can become greedy, lots of people waste their money, money leads to unhappiness. These are all very unacceptable true facts about money and what people do with their salaries and savings.

The Gross Domestic Product in Australia enlarged by 0.2 percent in the second quarter of 2015 above the first quarter. GDP Growth Rate in Australia was around 0.87 percent from 1959 until 2015. It reached an all-time high of 4.4 percent in the first quarter of 1976 and a record low of negative 2 percent in the second quarter of 1974. In 2013, Australia’s GDP per capita was $67,458.36 in U.S. dollars, and the United States’ was only $53,041.98. The inflation rate in Australia was documented at 1.5 percent in the second quarter of 2015. Inflation Rate in Australia was around 5.18 percent from 1951 until 2015. It reached an all-time high of 23.9 percent in the fourth part of 1951 and a record low of -1.3 percent in the second quarter of 1962 (“Australia Inflation Rate,” 2015).

A) a change in income on the quantity bought when the consumer moves to a higher indifference

Financial and Monetary Economics ‘‘Should we consider the Stock Market an efficient market.’’ In theory the Stock Market is said to be efficient as stock prices should follow a random walk, which, means that stock price changes should be random and unpredictable, If stock prices were predictable then this would prove that the stock market is inefficient as this implies that all available information was not already impounded in stock prices. Hence the notion that stock prices reflect all available information is known as the efficient market hypothesis (EMH). It was Professor Eugene Fama who created the term EMH, in his paper ‘Efficient Capital Markets’ and claimed that in efficient markets

We can write it this way: MPC=Change in Consumption Divided by Change in Disposable Personal Income. (AmosWeb, 2014)