Griffin Snow - Chapter 13

We have been learning a lot about currency, and how countries function in the world economy and in world trade. The most interesting part of the chapter for me was learning about economic geography of the world in a sense. Why are some parts of the world wealthy? Was it random?

Tropical climates are not good for the production of food goods, and are very helpful for the spread of diseases. So with less production and lower health, these countries are at a disadvantage. But on the other side, location is key to some tropical countries, and make them some of the richest countries in the world. One example is Singapore, whose key trading location puts them in a position to control and benefit from world trade. 

Erik Dahlman, Chapter 13

I thought it was very interesting how the use of human capital in developing countries decides their growth and the entirety of progress that they make is reliant on the distribution of their resources. With this in mind, it seems like it would be very effective to help countries manage their labor force over helping keeping their economies afloat.

Chapter 13

Question 6. In Chapter 13 the ideas of human capital and geography were very intriguing to read about, but brought up some questions that I find puzzling. Although Urban areas are losing workers and metropolitian areas are gaining workers wouldn't it still be harder to find work in a metroplitian area. The idea of a Heart Surgeon getting a job in New York is next to none. The competition factor and rigor would make it very hard for a young new worker from a small school in a small city. How can we develop a system in which every country can benefit from human capital. The one thing that can start or have an emeidate impact is schooling in those areas of the country. I believe that high in schooling in rural areas could also have an effect on the population in Iowa. When you go to Iowa you only have one Big High School per district which may or may not have well educated classes. The rigor at which is taught at many of them are probably low as well. If we could add small private schools or even add higher educated classes I think these rural areas will change. Also put inconsideration if oil becomes scarce we now turn to these rural areas to create oil in which we all can benefit from.

Hayoung Lim Chapter 13 Q 6

What I found most interesting in this chapter on Economic Growth was in the section about Democracy. It spoke of how famines do not occur because of poverty but because of faulty political systems that are in place. This all connects to the concept of rationality, that with independence people will do what is in their best interest. Everyones best interest in this case being not to have a famine. When the chapter brought up that India has not had a famine since independance it really solidified the importance of politics. Corrupt policies hinderence to allow markets to correct themselves is so foriegn as many of us think of policies to encourage healthy markets since that is a benefit to all of us. Though I guess corrupt governments don't know as much about economics as our esteemed Econ teacher. ;s

Zach Newton, Chapter 13, Question 2

The almost all of the issues raised in this chapter affect my life on a near daily basis because they have to do with how our economy is developing. However, what I found most interesting and applicable to my thoughts and beliefs of the economy is Wheelan's section of the chapter titled "War is bad." Often in America it is thought that war is what can stimulate an economy which is probably due to the fact that World War II pulled us out of the Great Depression, but if one looks across the ocean at Africa, war is not so much of an economy booster. According to Wheelan and The Bottom Billion by Oxford Center, "three-quarters of the world's billion poorest people are caught in a civil war or have recently been through one." This statistic appears to show that the only reason war is okay for the American economy is because government spending increases, but in these countries torn by civil war, there isn't really a government to increase spending.

Elizabeth Chun, Chapter 13, Question 6

I also thought the human capital portion of the book was very interesting. What really stuck out to me was the part about the human capital trap and how "if a nation starts out skilled, it gets more skilled. If it starts out unskilled, it stays unskilled." This is concerning issue that I hadn't thought much about before by definitely makes sense. If someone can perform a surgery, it is only beneficial to the rest of the country if there are other skilled workers to compliment it to assist him or her, make the medicines and build the hospitals. Although, this problem can be fixed by trade, but since rich countries and financing the poor African countries (like Ghana) its chances of producing and trading on its own are hindered along with the chance of there being economic growth. 

Gracia Gilreath, Chapter 13, Question 6

I thought an interesting part of this chapter was the part that discussed the importance of human capital in developing countries. Poor countries not only benefit from the skills and talents of human capital, but also adopt various technologies from other developed countries, due to the expertise of skilled workers. Wheelan says, "The people of Ghana need not invent the personal computer in order to benefit from its existence; they do need to know how to use it," and by using their skills and talents, they can access these technologies. However, skilled workers can not perform certain actions if there is not the right resources or other skilled workers. Fewer skilled workers calls for less incentive for other countries to invest in training the workers to gain skills. This proposes that human capital can also reap less benefits then initially intended. Human capital can be both beneficial and slightly detrimental to any developing country.

Kate Brown Ch 13 Q6

One section of this chapter that I found interesting was when Wheelan discusses the Samaritan's dilemma. This has been discussed in some of the other chapters especially the one that addresses what to do about poverty. Throughout this book it has been accepted that easing someone's immediate burden isn't very beneficial because it takes away their incentive to help themselves. However, in ch 13 Wheelan discusses an exception to this dilemma with the idea of property rights. If people don't have ownership over their own land they waste precious time protecting what isn't really theirs. If this is something that they don't have to worry about they can focus on other things that will help their economy grow. I also found this interesting because it is someone I have never really had to think about because here we have ownership over our property however this is a huge dilemma in developing countries.

Derik Graham, chapter 13, question 6/3

The part of this chapter that was most memorable and significant to me was Wheelan's retelling of Bill Gates's speech in Saudi Arabia. The title of the subsection was named "Women Power" and it is very aptly written because women are powerful. Gates's note brings up the conclusion that the Saudi's elimination of half of their work force and half of their human capital is the cause of their economic difference to the worlds top ten. This example led to me to question whether or not cultural differences between nations accounts at all for any disparities between them and I came to the conclusion that yes it did. To me a cultural segregation of gender effects more than just human capital but also the productivity of the country because there is a smaller labor force, and it also inhibits the countries progress forward in technology and wealth (which both stem from human capital). I think that until cultural divides shown by this example are irradicated, that the world as a whole will suffer economically.

Elyse Melling, Ch. 13, Question 6

One thing I found interesting in chapter thirteen was when Wheelan talked about how "all countries that have had persistent growth in income have also had large increases in the income and training of their labor forces" (Wheelan 301). Wheelan also talked about how education can improve public health which is a form of human capital. He mentioned that higher rates of education for women are associated with lower rates of infant mortality. I think we can use these facts to our advantage. If we know that education aids in developing an economy, we should do something to help the underdeveloped economies of the world.

Marisa White Chapter 13 Question 6

The section that I found interesting/ learned more was the part that said "natural resources matter less than you think". I always thought that countries that had a lot of natural resources were the most successful. The book gives the example of Israel being the richest of the Middle Eastern countries even though it has no oil compared to Saudi Arabia. When explained further in the section it makes sense, I just had always assumed that countries that had the most natural resources to produce things would be the wealthiest.

Maggie Chamberlain, Chapter 13, Question 7

I always knew that there was a disparity of wealth between nations, but I had never really thought about its origins. America has grown to be such a wealthy country due to our initial attractive assets for settlement. The Congo, on the other hand, with its high mortality rate due to its climate's susceptibility to breeding disease, was a location in which colonizers focused on extracting as much wealth as possible as quickly as they could. Since a place like the Congo was never an attractive place for long-term settlement, it never developed colonies that relied on advanced technology in order to sustain a large population. In addition to that, poor countries are not provided with the drugs they need to cure their fatal diseases because the rich countries that have the power to make these medications only want to make a medicine for countries who can afford it because they only want money. This is the sad truth, and Wheelan's main suggestion is to change the rich countries incentives- offer them a reward for creating a drug that will help the poorer countries. We can only hope that one day this will happen.

Elizabeth Chun Q6/Q2

What I found most interesting about this chapter was the relationship between China and the United States and how the United States is doing the opposite of saving and just importing much of what we need from China. In return, China exports a lot Of what they produce to the United States. Although this works now, it worries me that the United States is doing the opposite of saving (dissaving as said in the book). It makes me wonder if the state of the economy here in the US will still be healthy in the near future or if we will go into am economic crisis like many other countries discussed in this chapter.

Ram Q7 CH11

Before I read this I thought that currency was one power throughout the world that drives people do do things. The power that makes people come together. Its just that the values of them are different, but a general commonality between the world. Now after reading this chapter I understand more that money is really independent of the same species of thing. Something else that I got a new look into was the subjectivity of the value of the currencies against the governments of the worlds and the defense of their specific currency by spending a bunch. The real question is if it can be really that easy to raise demand.  

Hayoung Lim, chapter 11, question 6

What I found interesting in this chapter was the funny money way of valueing money. The very idea that currency exchange would be based one imagination and feeling seemed perposterous to me. Along with that the trading that occurred between East Germany's Vodka and the Pepsi company's cola syrup was surprising since I didn't expect credible companies to use a old-fashion barter system, though it makes sense when East Germany has a soft currency and the exchange of currency is just the same as any other good such as vodka or cola syrup.

Jacob Besser-Chapter 11-Question 6

The thing that struck me the most about this chapter is how global currency trade can be used to make money so quickly and how detrimental the gold standard was for the global economy. It was interesting to see how having a stable exchange rate between currencies actually discouraged economic growth. Knowing what I know now about the business cycle it makes sense that recessions, deflation, and inflation are actually healthy for an economy and that having all currency tied down to a fixed resource ties down the growth and restricts the natural business cycle. The questions that I have are: How does one benefit from buying and selling currency and does this work the same way as buying and selling stocks? and What caused the ERM to fail and why?

Chapter 11

Question 6. Page 246-247 were quite helpful in revealing currency rates in each country. Wheelan revealed that The American Dollar is just a piece of paper but it's intrinsic value is worth the same as the other currencies. The difference is the exchange rate and value that we have over many other countries in the world. We use the PPP which is the purchasing power parity. Many times when trading with other countries we notice that our value is lost once exchanging with others due to our high currency level. Wheelan talked about going to china and heading to the black market to exchange his $100 for Chinese dollar. The problem was huge in return he received $13.50. The good thing is the PPP they collect and compare currency all over the world which will convert our dollars equally with those other countries no matter the value changed.

Chapter 11, Derik Graham, Question 6

I found the section in chapter 11 about overvalued and undervalued currencies very interesting. The example of the BMI or the Big Mac Index peaked my interest. I found it interesting that across countries goods and services that are sold worldwide can deviate in price other than the national exchange rates. I wonder if this is comparable to the example earlier of someone being able to swap currencies and buy TVs really cheap and sell them for a profit. Possibly an exploitation of the exchange rate by the government instead of an entreprenuer.

Kate Brown Ch 11 Q6

One topic that I found interesting was the fact that their is a system to predict the changes in value of currency. I understand that this is used to make sure that when on nation's currency is exchanged for another you receive an amount that has the same value as what you originally had. However, I find it interesting that their are still exchange rates that are not balanced. For example, one US dollar should be worth about 3.5 Chinese renminbi when it is actually work more than double that.

Zach Newton, Chapter 11, Question 6

What I found interesting in this chapter was the section titled "Funny Money" in which Wheelan talks about "soft" currency. It was fascinating to me that soft currency can result in neat, clean deals like Pepsi for Vodka, but it can also result in not so neat deals, like riots in Argentina. Wheelan went on to describe in depth the fall of Iceland's economy following the Great Recession which resulted in McDonalds closing down due to the lack of value in the Icelandic currency. All these crazy chain events are very interesting to see how one thing can snowball into mass chaos.

Marisa White Chapter 11 Question 6

Something that I found interesting was just thinking about how weird it is that every country has a different currency. I feel like it is just a pain to have to convert money since different currency can be worth different amounts. This might be a stupid idea, but I think it would be interesting to see what it would be like if everyone in the world had the same type of money. That seems like it would be more practical and would be one less thing that people would need to worry about. But I am sure there is some sort of reason why it wouldn't work because if it was more simple I feel like that's how it would be.

Erik Dahlman, Chapter 11

I thought it was really interesting how people can game the system of different currencies not backed by intrinsic value to end up with huge profits. The fluxuation of the value of various currencies seems to suggest that there is large gaps where money is lost, which is where people can make money, meaning that we are losing money that could be spent other places within the economy. With this in mind, it appears that the economy would be much more healthy if the world were to have a common currency to prevent the "leakage" of money from the system in trading currencies.

Elyse Melling, Chapter 11, Question 6

I thought it was really interesting how Wheelan said "Even little kids trading snacks in the lunchroom recognize that what you give up should be worth what you get back" (Wheelan 262). This is really a small scale example of one of the primary components of economics: trading/exchange rates. When trading with other countries or exchanging money in another country, we want what we give to be fairly equal to what we get in return or else someone is getting a bad deal.

Gracia Gilreath, Chapter 11, Question 6

The passage that explained the economic relationship between the United States and China was very interesting and informative. The passage explained how both sides of the relationship are not in the best shape. The United States has borrowed many loans from China in order to get its exports, so the US owes China trillions of dollars. This has negative connotations for the US because if China stops lending, the stability of the American economy would plummet. Likewise, this also has negative effects for China because the United States government could promote inflation by printing more money, which will cause the dollar to lose value along with the trillion dollar debt. The United States would then be able repay the debts fully (because inflation has greatly lowered the debt due to the decrease in value of the dollar), but China would not get the amount they deserved, so this could lead to more negative and even destructive outcomes.

Maggie Chamberlain, Chapter 11, Question #6

I thought it was really interesting how, although we see ourselves as competitors with other countries because of our differing economies and currencies, we actually help each other out. As Wheelan mentioned, it's not a zero-sum game like baseball. In the global economy, it's not that one nation wins and all of the others have to lose as a result. Through the example of New Zealand's large deficit, Wheelan helped to explain the relationship that countries have with one another. The rest of the world steadily accumulates New Zealand's dollars through selling more to New Zealand than they are buying from it and trading their accumulated  New Zealand dollars for their home currency. The supply of New Zealand dollars for sale will then exceed the demand for them, pushing the value of New Zealand's dollar down relative to other countries. This will increase the demand for New Zealand's less expensive products and will increase exports, narrowing the current account deficit. So, it's necessary for nations to work together by buying each other's products and trading in order to all win in the end.

CH10 Q6 RAM

The Federal Reserve and the Federal Open Market Committee. The close relationship that these two sanctions have is interesting. The FOMC has a mother son relationship it seems. The mother being the whole Federal Reserve and the son being the FOMC even thought the committee is the branch in the Federal Reserve they seem to differ just a little. If the FOMC decides to lower cost of borrowing then they can have a discount rate and that will stimulate banks to directly borrow from them. but they can also do the opposite. What I really took from this was the power that the FOMC actually has. Because they can borrow money from the Reserve directly they have the power to skyrocket interest and have people not loan or make it nearly zero and the banks will flock. They have so much more power then what it seems on the outside. The fact that they can flip the country's economy overnight. But the real seriousness is that they can effect the rest of the world significant thought.

Griffin Snow - Chapter 10

The chapter talked about inflation and the importance of the federal reserve in our economy, but the most interesting part of the chapter was the beginning of the section of deflation. Wheelan talked about the economic death spiral, and how consumers watch there total value (including house, cars, etc.) go down, while they still have to pay the same price for their mortgage. They are becoming poorer, and they know it. Paul Krugman spoke about the cycle of a depressed economy on page 238. He said, "Prices are falling because the economy is depressed; now we've just learned that the economy is depressed because prices are falling. ...Falling prices and a slumping economy feed on each other, plunging the economy into the abyss." Without help from the government, we would continue the downward spiral.

Chapter 10

Question 6. Page 230 to 231 were very descriptive on what inflation and federal reserve really mean. Wheelan brought up points that connected both together. He talked about this mans tractor in Des Moines; The man was angry because both the tractors were new the only difference is when he purchased them. One cost 40,000 and the other cost 7,500. The reason for the difference was a key word called inflation. The price of tractors were and still are rising but the dollar in which he purchased is going down. Now the Federal Reserve comes into the mix by controlling the scarcity of paper currency bought in the U.S. There job is to keep inflation at a set price not going up or down because if that happens the world will start to spiral and money will be all over the place. The farmer needs to realize that the price of our dollar will always go up no matter what. The purchases of tractors will go up due to new appliances added, where there produced, and how well the market of tractors are doing.

Jacob Besser ch10 q6

The thing that I found most interesting about this chapter is how any decision that the fed makes can have a massive effect on not only the US economy but also on the worlds economy. If they decide to lower interest rates it can cause a butterfly effect all around the world raising demand and eventually causing inflation globally. Furthermore the economy after a certain period of time returns to its equilibrium as prices even back out to increased wages and demand will go back down as the cost of living goes up matching the interest decreases. Given that the fed has this much power on the global economy it seems to me that the public should have more of a say in who runs it.

Hayoung Lim, Ch10, Question 6

Something I found very interesting and surprising was how much the Federal Reserve effects our lives and our suffering or lack of it. Since the Federal reserve controls the money flows indirectly such as when the terrorist attacks occurred on 9/11 the Reserve itself stayed open and running while the markets closed. The Monday following the attacks the market re-opened and the Federal Reserve cut interest rates down by 0.5 percent. I had seen the Reserve as just the place that housed and made money but now I realize the sheer power that they have. Though some criticize them for having too much power I see it as imperative to keep the economy in check and prevent another Great Depression.  Though it is worrying how the Reserve must make educated guesses due to the delayed reactions of their actions. 

Zach Newton, Chapter 10, Question 6

The most interesting part of this chapter to me was when Wheelan mentions that as the Federal Reserve attempts to keep the economy chugging along around the speed limit of 3%, Congress is trying to make the economy go faster. "The Fed may tap on the accelerator ever so slightly only to have Congress weigh it down with a brick." This struck me as a very inefficient way to "fix" the economy if one branch of government does something that the other branch of government has to reverse or dial back. I am surprised that they do not have a constant line wired between congress and the Federal Reserve so that they can always inform each other of the situation and what would be best to do.

Derik Graham Chapter 10 Question 6

One thing that I found very interesting about this chapter was Wheelan's discussion on the "inflation tax." I found it very interesting that a govenment could pump money into an economy to generate tax revenue. What did strick me as confusing though, is how does the government gain in this scenario? What I fail to see is how exactly does devaluing the dollar do any good for them in the long run, because ultimatly the federal reserve will have to correct the problem that the government started. I guess it would make sense is it was a plan to jumpstart consumption.

Kate Brown chapter 10 question 6

A section of this chapter that I found interesting was the author's introduction to defaltion. The negative effects of inflation are discussed and it is explained how the cycle of rising pricces can be dangerous. The logical thought would be that the opposite of rising prices (falling prices) would be the solution. However, this chapter discusses how falling prices lead to people postponing their purchases. "Why buy a refrigerator today when it will cost less next week?" At the same time wages are also dropping so people continue to spend less. One of the most important things that this book has discussed is that an economy can only grow if people are buying things. Deflation causes people to "feel poorer" and therefore contribute less to the already weakened economy.

Catherine Dustrude • Chapter 10 • Question 7

Hm the job of the Federal Reserve is like Brain surgery, why must there be so many medical references.... 

I learned most from the speeding analogy. No posted speed limit, and a delayed reaction to both the gas and break pedals cleared up my original confusion. The Federal Reserve must facilitate our rate of economic growth, but it's harder than it sounds because nothing is clear, or marked, or produces immediate reactions. Another thing that strongly registered with me is that the value of any type of currency lies in its purchasing power, the fact that other people accept them (dollars) too, andthe fact that it is scarce. It's scarcity is controlled also then by the fed reserve. We covered this next part briefly in class, but it made sense then how Governments can, and have caused crazy fast rates of inflation because inflation is good for those in debt. Hope was reestablished though, when Wheelan highlighted that Monetary authorities must be responsible and so they are appointed not elected. Smart. 

One thing that doesn't quite make sense... Inflation tax? 

Erik Dahlman, Chapter 10

One particular passage that stuck out to me as I read was the description of how a monetary policy was "bungled" leading to destabilization of the world economy leading to chronic deflation leading to the great depression, the Nazi revolution, and World War II. The fact that a simple policy can alter the course of world events to such a degree is astonishing to me. Through this, I realized how far reaching economic policy can actually be beyond just the world of markets and money.

Gracia Gilreath, Chapter 10, Question 6

I thought that the section that discussed bartering and the purpose of money was significant to why we use the currency we do. Before the American dollar was established people used to barter, or trade goods, in order to receive the item they needed, but this doesn't work very well in an advanced economy like the US, so the dollar was created. The dollar is viable because it serves as a means of exchange, it serves as a unit of account, it is portable and durable, and is relatively scarce so it is able to store value.

Chapter 10, Maggie Chamberlain, Question 7

I've always heard the word inflation thrown around in various situations, but I had never really considered how scary it is how much our government can manipulate it for their own good and hurt us as a result. Basically, the government can devalue our money by driving up inflation and governments actually do this when they are in debt. I had never thought about this, but now I hate the idea that our government can manipulate inflation so that in future years their debt won't cost as much. But, what does that do to us? When we are paid back, our money has lost value. Sure, this is a solution to making government's debts seem smaller, however it's a very selfish solution.

Marisa White chapter 10 question 6

I quote that I found to be interesting is, "Think of the Fed as always driving in unfamiliar terrain with a map that's at least ten years out of date." I think this statement should make people somewhat uneasy because everyone puts so much trust into the Federal Reserve when it is so hard to control what happens. Another thing that is interesting is money really has no value since it has no ties to a precious metal anymore. Money is just a piece of paper that everyone wants, but technically has no real value but to a majority of people it is the most valuable thing.

Elyse Melling, Ch. 10, Question 6

A part I found interesting about chapter ten was when Wheelan discussed the use of mackerel as a unit of exchange in prison. I thought this was interesting because it relates back to the comic we read in class and how originally the group on the island used rocks as a unit of exchange. This really shows that in order to use anything as a unit of exchange, the people have to believe that it is valuable. A rock itself isn't valuable in the same way a dollar bill itself is just a piece of paper, but when you believe it is valuable, then it has value.