Money and Inflation, Essay Example

Chapter 28: Unemployment

Unemployment is measured using a balance of those who have a job and those who do not but are eligible to work in the country. Individuals that are allowed to work are considered to be a part of the labor force. The unemployment rate is different for people of different backgrounds. For example, black females appear to have the highest rate of unemployment while white males and females appear to have the lowest. In most economic situations, there is an expected unemployment rate at all times, but a lower rate is desirable and is indicative of a stronger economy.

Chapter 29: The Monetary System

Money is an economic asset that people use regularly to purchase goods and services. It operates as a medium of exchange, unit of account, and store of value. In the United States economy, money can be defined as currency in the form of paper bills and coins, demand deposits which are stored money in bank accounts, and measures of money stock. The Federal Reserve System acts as the central bank in the country. Ultimately, it regulates the flow of money, which can account for the inflation rate and control over GDP.

Chapter 30: Money Growth and Inflation

Money growth can impact the growth of the economy. Inflation increases the overall level of prices, while deflation decreases this price level. Money supply is determined by the federal banking system. Ultimately, inflation can be impacted by the amount of money available, the current price levels, and the growth rate. Inflation decreases the value of a dollar, meaning that when prices are inflated, people will have to pay more of their money for the same goods and services.

Chapter 31: Open Economy Macroeconomics, Basic Concepts

There are several types of economic systems. Closed economies do not interact with the economies of other countries, while open economies do. Open economies create monetary exchanges through the use of imports and exports. The balance of this relationship is often impacted by the value of the goods exchanged. Trade surplus occurs when there is more exports than imports and trade deficit occurs when there is more imports than exports. The U.S. economy has been able to increase over time due to the growing importance it has placed on international trade. However, the nation prefers to spend rather than save and the national savings have decreased significantly over time.

Chapter 33: Aggregate Demand and Aggregate Supply

Demand and supply are related to economic fluctuations. Over time, the real GDP appears to increase. Furthermore, while investment spending increases, the employment rate constantly fluctuates. This happens due to changes in the money supply and the availability and prices of certain goods and services. The aggregate-demand curve can be used to measure this trend. Consumer spending, changes in investment, and changes in government spending can work together to shift the curve. Two major aggregate shifts that have occurred in history have included the Great Depression and World War II because the Great Depression had a significant impact on the economy, while World War II improved the economy.

Readings Chapter 29

Employment statistics can be measured by determining the amount of individuals who work as paid employees compared to the amount of individuals who are eligible to be in the labor force. The labor force participation rate is also used to measure this variable, and this value is calculated by dividing the labor force into the adult population and multiplying this number by 100. A concept known as the natural rate of employment dictates the idea that a certain number of people will be unemployed within a given area based on the availability of jobs and other baseline characteristics. Deviation from unemployment is termed cyclical unemployment. A measurement of the average length of unemployment for these individuals are also useful to determine the nation’s state.

Readings Chapter 30

The monetary system is the process that people have developed to replace the bartering system for goods and services. This system allows coins and paper money to hold a certain value to assist the exchange of items that could be purchased or sold. This is a beneficial system because it allows people to have a more direct access to the things that they need to survive. Furthermore, it allows for a greater measurement of the state of a nation’s wealth, in addition to tracing expenses that the government needs to successfully support its citizens. In a large nation, it is helpful for money to be exchanged because the bartering system would become too complex to be feasible in the modern setting.

Readings Chapter 31

Keeping track of money growth and inflation is important because these factors ultimately define the amounts of good and services that money is able to buy. When the inflation is low, the money that people have could purchase more products. However, as this value rises, people will need to spend more money in order to acquire the same amount of goods. The Federal Reserve exerts a degree of control over inflation by determining the amount of currency that it will allow to remain in the system. However, inflation increases when the demand for goods is increasing faster than the supply. Therefore, these practices could be modified to prevent against inflation.

Readings Chapter 32

Economies around the world can support one another by engaging in trade. This is an important concept because it considers that the wealth of a nation could be impacted by its ability to exchange goods with others. In addition, these exchanges can impact the inflation rate experienced by individuals within a country. Despite these challenges, it is important for nations to remain engaged in international commerce if they wish to remain economically strong. Countries can gain large amounts of income exporting goods, while individuals could acquire their wants and needs by important them. The United States continues to engage in these trade practices so that it could continue to act as a powerful world economy, while many competing nations are attempting to follow this suit so that they will be able to grow and compete more effectively.

Readings Chapter 34

Economic fluctuations are relatively unpredictable and short-term fluctuations are not uncommon. These fluctuations are generally in response to changes in the supply and demand of products, which could temporarily alter price. These changes are in significant contrast to long-term fluctuations, such as the one the country experienced during the Great Depression. Short-term fluctuations are somewhat natural and are easier to recover from, although many policy makers believe that requirements should be put in place to ensure that the market returns to normal following these alterations.