Classic View (3 Types) Cheat Sheet
Wednesday, March 18, 2020
Wednesday, March 4, 2020
Understanding AP Classical View
Multiple Choice Questions
1) You read a Multiple Choice question that starts with the phrase "In the Long-Run".
In the Long-Run implies that we are starting at Long-Run Equilibrium, then something changes such as the FED increasing the Money Supply which increases aggregate demand which increases the Price Level. We are now in an Inflationary Scenario and we must figure out what happens in the Long-Run.
E - Correct Answer
As wages increase, it shifts the SRAS to the left,
Business prices increase and output returns to full employment (LR-Equilibrium)
at a higher price level (No change in the RGDP)
Wednesday, January 29, 2020
Interest Rate Sensitivity
Money Demand & Investment Demand
Interest Rate Sensitivity and Money Demand
If people's need (Demand) for money is more sensitive (elastic) to price level changes,, then when the price level increases the Demand for Money curve will shift rightward more,, therefore the Nominal interest rate will increase at a greater rate than if people's need (Demand) for money is less sensitive (inelastic) to price level changes.
Interest Rate Sensitivity and Investment Demand
If people's investment demand is more sensitive (elastic) to interest rates,, then when the interest rates increase investment demand will decrease by a larger amount (think full crowding-out),, if people's investment demand is less sensitive (inelastic) to interest rates,, then when interest rates increase investment demand will decrease by a small amount (think partial crowding-out)
Thursday, January 23, 2020
Journey to thank a thousand people for a morning cup of Joe.
Author AJ Jacobs embarked on a quest with a deceptively simple idea at its heart: to personally thank every person who helped make his morning cup of coffee. More than one thousand "thank yous" later, Jacobs reflects on the globe-trotting journey that ensued -- and shares the life-altering wisdom he picked up along the way. "I discovered that my coffee would not be possible without hundreds of people I take for granted," Jacobs says.
Division of Labor
A simple example of hamburgers being made at home versus at a restaurant can help illuminate the explosion of prosperity since the Industrial Revolution. The story of the division of labor and development of specialized tools is not a new one — Adam Smith began The Wealth of Nations with this concept. Yet it still has tremendous explanatory power about the world we inhabit.
Comparative Advantage - Podcast