Jonathan Webb, Chapter 12, Question 6

       Reading the two passages about how trade makes us richer and trade creates losers cought my attention the most. I thought it was funny but important how he went from talking about all the advantages of trade to the bad side affects of it. About trade making us richer, he says, "productivity is what makes us rich, specialization is what makes us productive. Trade allows us to specialize" (275). He gives examples of why it's better for people in Seattle to engineer airplanes rather than spend their time on making shirts where people in Banglesesh can do it because they do it best there while the people in Seattle do best by engineering planes. I agree with that. But when he gets into telling about how trade creates losers is where I question him. He mentions in trade, the Gaines outweigh the losses. An examle he gave was In Maine there is a shoe factory where many were employed but the the company notices that it can move the factory to Vietnam and pay those workers a lot cheaper than the ones in Maine. He then brings up that someone had written him, they're going to stay poor no matter what. He agreed but went on talking about how it's still better for the factory. My question is, why can't they keep the factory in Maine and keep Americans employed. Yes it's more expensive, but those workers can use the money they get and donate to the people in Vietnam. The people here might not know how to do anything else Either!Like he says no matter what, someone is going to lose out. But I think we need to focus on employing people in our country first rather than having these business take advantage of others. But again, he's an economist, and they think about the long run. Trade facilitates growth. But where do you draw the line on when is it not the best option to think about the long run? Or is the long run always the best option?

Griffin Pontius, chapter 13 question 6

       While discussing human capital in this chapter,  Wheelan writes about skills and how they matter in a developed world; what really caught my attention was when he began to talk about how little of incentive there is to attain skills if one does not live in a "skilled" area.
Wheelan ends his paragraph with the following quote, "If a nation starts out skilled, it gets more skilled. If a nation starts out unskilled, it stays unskilled."
       This idea was a foreign one. It seems like common sense that people would want to continuously push themselves to become better people. But in unskilled countries, it seems to be the oppisite.  Wheelan provides a great example of how a skilled worker needs other skilled workers to be successful. (The heart surgeon needs nurses etc) He then goes on to explain how there is much less of an incentive to become skilled if those around you are the same way.  It shocked me that this was the case, but at the same point it makes sense.  It really makes me wonder what kinds of things these unskilled people (who are very trainable) could become.  Who knows, it sounds crazy, but Micheal Oher was that way, who's to say there aren't more like him?

Nathalie Heidema, Chapter 12, Question #12

People and businesses do things that make them better off so is it with (international) trade and globalization; the benefits from them far exceed the costs involved. Trade makes us richer by freeing our time and so allowing us to do what we can do the best - and thus be productive. Productivity, then, is what makes us rich and specialization is what makes us productive. Trade allows us to specialize ad therefore it's so essential. "Trade makes the most efficient use of the world's scarce resources." The downside of it is that it also destroys (especially low-skilled) jobs (even though in the long run they are replaced by new, more efficient ones). The economic gains from trade outweigh the losses, but the losers lose badly. To avoid that, protectionism tries to save jobs. Although it's clear that they saved a certain amount of jobs, it's difficult to estimate how many new ones could have been created. And so by cutting off the trade in order for businesses to survive, a country is made poorer and less productive. That's how by imposing taxes on Brazilian oranges , the government Mae a trade barrier out of this tax. The orange juice became $0.30 more expensive and by taking this money from common citizens it benefited merely the interest group - the orange growers in Florida. 

Trade is also good for poor countries, too. It gives them access to developed markets, export industries pay higher wages and create more competition for workers (which raises wages elsewhere) and also they are introduced to foreign capital, technology and new skills. 

Economic development is not necessarily just bad for the environment. It's true that with production pollution is involved, but as we get richer we care more about the environment and have more resources to help it. It's tricky with the climate change though. As China and India are getting richer, they produce more and build more plants that release a lot of CO2 emissions. The solution would be promoting growth in ways that minimize environmental damage and impose carbon tax. 

Zach Du, Chapter 13, Question 6

The part which talks about Geography's effects on economy really caught my attention: "Given the varied political, economic, and social histories of regions around the world, it must be more than coincidence that almost all of the tropics remain underdeveloped at the start of the twenty-first century" (303). Development expert Jeffery Sachs gives us the answer of why these tropical weather has negative effects on economy: in the tropical areas, where always has high temperature and heavy rainfall, food production is much less efficient than European countries and it's much easier for diseases to spread all around the town; on the other hand, Chicago for example, would have much lower possibility to suffer diseases, because its cold weather could control mosquitoes, therefore reduce the spread of any bacteria.  

Peter Webster Chapter 13 Question 6

Human capital and money are clearly very important in creating and maintaining a successful economy, but they are much more important in a failing economy. By failing economy I am referring to countries like Ghana, Chad, Haiti, etc. Bringing human capital and money to these countries may really develop the economy. It will bring innovative ways to do things, increasing the productivity. With money, technology and equipment will be purchased. Since a lot is done through human labor in poor countries, productivity would be increased tremendously using machines. If people are coming from a country with a successful economy they could bring ideas to other countries to help develop another economy. Bringing education and basic medical supplies would decrease a lot of illness and increase human capital, leading to jobs.

Julia Carle, Chapter 13, Question #7

After reading chapter seven of Naked Economics  is mainly about how economics knows how to solve many economic problems, but at the same time, economics doesn't know major economic issues. Wheelan even stated "we do not have a proven formula for growth that can be rolled out in country after country like some kind of development franchise" (296). What I've learned from reading this chapter though, is that economics doesn't know exactly how to have every country be as prosperous as ever. I also learned the sad truth when it comes to the impoverished part of the world which is two billion people. That is a crazy high number that I wish wasn't true. I knew poverty was a big problem worldwide, but I was completely oblivious to how many people are affected by it. It has broadened my perspective on worldwide poverty. It's made me feel more grateful that I was born into a relatively prosperous economy compared to others around the world.

Maddie Binning, Chapter 13, Question #4

The solution to fixing the economy of developing countries is not a simple one. While the things Wheelan suggests such as fixing the government and their policies, finding the resources to properly use human capital, and raising up women make logical sense in the fight to bring these countries into the healthy world economy, success is questionable. The many steps it would take to fix a countries financial situation is far more involved than many of these corrupted governments will be willing to take part in. Intervention from other countries often gets messy and threatens to create conflict. For these reasons and others, the success of the developing world depends on the reformation of government in a number of countries hence creating a very involved and difficult path to success.

Olivia Barr, Chapter 13, Q.7

     While reading this chapter I was astonished by the number of complex issues aside from poverty itself that keep poor countries from economic development, and ultimately escaping the grips of widespread poverty. Things as seemingly insignificant as not granting property rights can serve as a major hindrance to economic development. Some of the most prominent factors of widespread and prolonged poverty is lack of human capital, infrastructure, and economic activity, but it is unfair to blame "laze" citizens for these things because if they are forced to spend large amounts of time protecting property that is only nominally theirs, they can not be expected to get a formal education that would enable them to get a good job and contribute to the economy, or even create low cost methods for developing infrastructure within the weak economy of their country that could arguably light the path to economic development.
     It was also very shocking to me to read that poor economies foster political and social unrest. That is not something that I had not known before reading this chapter, but I hadn't fully realized the importance of that fact. While living in one of the most stable countries in the world, both socially and economically, we are a target for groups who are radically disheartened by the conditions within their own countries, so as a result the United States Army sends troops and drones to combat these issues; maybe a better response to fighting terror groups is to identify the issues that contribute to poor economic circumstances in their countries of origin, and provide guidance in eradicating them before they become extreme enough to foster radicalism rather than giving the countries more reason to dislike the US by sending troops into their land.

Angela Scharf, Chapter 13, Q.6

     A part of the reading that interested me was the passage about no excessive regulation. This section refers to the government regulations that are unnecessary and provoke corruption within the bureaucrats. Government officials, especially in underdeveloped countries, tend to enact excessive civil codes and rules that make opening businesses difficult and unnecessarily time consuming. The natural human tendency is to want to avoid these regulations, and in order to do that these entrepreneurs pay off individuals in the government, further promoting corruption. This allows the business to open earlier, but sets their income back because of the cost of bribes. This passage explains that the excess regulations are only helping the well-off government officials, while discouraging business owners who need the money. This cycle proves to be detrimental because these excessive codes decrease productivity and potential spending, therefore bringing down the GDP and doing more harm than good. 

Jona Bakke, Chapter 13, Question #7

Something that I found particularly interesting in Chapter 13 is the observation that having natural resources does not make a country more successful or wealthy, but may actually be more harmful than helpful. Wheelan points out that Israel, who has no natural resources, is much wealthier than other Middle Eastern countries who have vast oil reserves. And Japan and Switzerland are much better off than Russia, who has far greater natural resources. This seems backwards; I would expect that resource-rich nations would naturally be wealthy from their ability to make profit off of their natural reserves.

However, Wheelan explains that having natural resources changes an economy and can actually be harmful. Mineral riches can lead a country to spend much of its time and resources exploiting these reserves, which takes assets away from other industries. Also, an industry of natural resources is prone to random price swings. Furthermore, countries that are rich in resources often do not use the money they acquire from these resources to better their nations. Wheelan states, "Money that might be spent on public investments with huge returns- education, public health, sanitation, immunizations, infrastructure- is more often squandered" (Wheelan 309). This idea that having natural resources can actually be more detrimental than helpful to an economy is very interesting and is something that I had never thought of before.

Darby Quast, Chapter 13, Question 6

While reading chapter 13, the passage about the importance of women in an economy struck me as very interesting.  Wheelan compared not investing in girls or women, to a farmer only planting on half of his land.  I always knew and believed that women should have equal rights as men, but I never realized how important this is to an economy.  In the Arab League, the per capita income growth has been only 0.5% a year.  This is lower than any other place in the world except for sub-Saharan Africa.    One of the problems thats causing this is women's status in these arab countries.  I also found the study in the Ivory Coast very interesting.  It showed that when women in developing countries get more money, they spend it on things like housing, nutrition and housing, where men spend it on tobacco and alcohol.  If Saudi Arabia ever wants to be one of the Top 10 countries in the world in technology, they are going to start using all of their recourses, not just half.

Nathalie Heidema, Chapter 13, Question #7

There are policies (and geographical endowments) that make the difference between rich and poor countries. First of all, effective government institutions are essential for a country to develop and grow. A country needs laws, courts, basic infrastructure, efficient collecting of taxes and so on. This, however, must be done in an honest, transparent way because corruption is what kills economic growth. Resources are allocated badly, innovation stifles and foreign investors are subsequently discouraged. Why are former Soviet countries doing so badly in comparison with Western Europe? For  sure the corrupt politicians have a lot to do with it. Another thing is property rights. Providing formal property rights makes countries most valuable assets (land) more productive and it encourages work. Next, human capital is what makes us productive, which subsequently determines our standard of living- wealth. Increases in education and training of labor forces is what has a major impact on countries growth and growth in income, it also improves public health and decreases infant mortality. Also, geography plays a role in wealth too just 2 out of 30 rich countries lie in the tropics. The weather can be attractive but it is bad for the food production and spreading of diseases is easier (malaria). Trade is also crucial for domestic businesses and industries in order to face international competition and thus grow stronger, which makes the economy stronger. The government should conduct responsible monetary and fiscal policy (not heavily over-borrowing) but avoid excessive regulations. Other points (but not less important) are democracy, gender equality and no wars. Natural resources might seem to some as determiners of wealth, however, why do resource-poor countries like Japan or Switzerland have far better economies than Russia or oil-rich Middle Eastern countries? Creating wealth is taking inputs like human capital and producing things of value. Poor economies are not organized to do that. That's why 2 billion people live on less than $2 a day.

Madison Webster, Chapter 13, Question 6

It was semi strange to me to think that skilled workers succeed most where there are other skills workers. This seems weird because I feel as if a skilled workers' time would be more valuable in a location where there is an absence of skilld workers therefore their talents would be rare. However, this is not the case. If a country is unskilled, they will stay unskilled because the resources are unavailable to remove themselves from this title. If a country is skilled, the will stay this way because there are numerous people to learn from and grow in a skilled area. Not to mention practice the skill they acquire. 

I was able to see this first hand. I traveled to Haiti this past February with 60 others on a medical mission trip. My father is an ophthalmologist and this was his fourth time down in Haiti to do surgeries and volunteer in the community. Since the rules regarding health and privacy are more lenient, I was granted the opportunity to join my father in the operating room to watch him do surgery. By my surprise, he was actually helping to teach a local Haitian ophthalmologist. This woman was skilled but was surrounded by an unskilled environment so was unable to practice her work. It took a number of skilled workers to arrive in order for her to succeed in a skilled environment. 

Taylor Bye, Chapter 12, Question 6

A KFC in the middle of Bali. Seems a bit odd, does it not? Maybe back in the 1980's when Charles Wheelan first saw this sight on his trip to India. Now it's common to see McDonald's and KFC's and other primarily American companies anywhere in the world, as well as seeing products from China and Germany here in the states. And that's a good thing! Maybe it makes me some kind of snob, but I can tell you that if I can afford a German car when I'm older, I will jump into that before any American car. This brings us to the overall analysis of economics found in Chapter 12: globalization and trade.

What I find interesting is that depending who you ask, globalization can either be a very good or bad things. It's quite relative...in fact, it's quite amoral. For example, a form of isolationism would keep certain American workers in their jobs but would slow down both our economy as well as the world's. Ask that American worker if isolationism is the way to go, he or she would probably say yes because they get to keep their job. Ask an economist, the answer would be a solid no. Ask someone who likes to avoid conflict and unfairness and they would probably frown upon globalization. But ask those higher-ups in the business world who are making millions off of people a half a world away and they'd be all for it.

Trade and globalization stimulates our interconnected economy and makes us good economists because we have to take into account how our spending/saving actions are affecting the world economy. Yes, it may cause some people to lose their jobs and an unfair competitive air, but it's working to better the economy as a whole not only for us here in the U.S. but everywhere.

Rita Hammer, Chapter 13, question 6

The majority of this chapter was about policies that economists believe make a country wealthy or poor. The part that stuck out to me the most was that natural resources matter less than we think. I always thought of countries with an abundance of oil, coal, etc were extremely wealthy; however, Wheelan points out that "Isreal, which has no oil to speak of, is a far richer country than nearly all of its Middle Eastern neighbors that have large petroleum reserves." It was surprising to me that Wheelan even pointed out that abundant natural resources may actually be harmful to the growth of an economy. His point relates to the importance of trade. He says,"they (mineral riches) divert resources away from other industries, such as manufacturing and trade, that can be more beneficial to long term growth." This statement puts things into perspective for me, especially when talking about poor countries. Having stuff simply doesn't make any country rich; however, having skilled, educated people and the ability to trade does.

Sophie Gunderson, Chapter 13, Question 4

Over the past summer, I participated in a World Vision Mission Trip with my church to a small town called Wallace, West Virginia. The culture of this Appalachian town was very different than the culture I grew up around in midwest Minnesota. In short, I was able to realize the huge wealth gap that is present in the United States through hands on experience with a family I worked with all week. However, instead of striving to get out of the immense poverty they lived in, I saw that it was generational poverty that was not going to end soon. They had no will to end it and they saw no way they could end it. This community had been working in coal mines their entire lives and had no other skills. So, once the mines shut down, they were out of jobs and out of luck.

While reading Chapter 13, my mind wandered back to this family and to this community. Charles Wheelan focused more on the different countries in the world that struggle with poverty and the continuous cycle of it but even though the United States is one of the most developed economies in the world, we struggle with the same issues as the poorest. At the very end of the chapter, Wheelan says, "things become better when there is an overwhelming political will to make them better." Along with the infamous saying of "where there's a will there's a way",  I think that with increased political effort and increased human capital, these families and countries living in ill poverty can be better off. Wheelans provides many ideas and examples throughout the chapter other than human capital but at the end of the day, it comes down to the will to make it happen and carrying through with that will.

Taylor Bye, Chapter 13, Question #3

It probably shouldn't be a surprise to me, but funny enough it is; that government is so involved in the economy of a country. I guess it just never occurred to me. Maybe it's because when I used to think economy, all I thought of was Wall Street and the stocks in specific companies. However this chapter, along with the whole of this semester, has proved me to be extremely wrong.

Economists Daron Acemoglu, Simon Johnson, and James Robinson had a theory about what would determine the economic success of a developing country. They believed that the success would directly correlate to the success of the countries that had formerly colonized them. They found that countries that had been colonized successfully by European countries had flourished while those that were difficult to colonize were much worse off. The impact of this was to highlight the importance of a stable, non-corrupt governing body in establishing the steadiness of a country and its economy.

Of course, I cannot hope to live in a country whose government is perfect, but since I reside in a democratic now, I at least have a say in who will end up in charge. This bit of this chapter made me think long and hard about how I will choose to stay informed and vote when the next election rolls around. I will look for someone who will establish as stable of a foundation for the country as he or she can and I will look for someone with good economic and social sense. I will not be mindless in deciding who runs the country I'm living in for as Acemoglu, Johnson, and Robinson found, whatever kind of government runs the country, makes the country what it is.

Peter Webster Chapter 11 Question 6

I found what he said about the gold standard to be interesting. The gold standard backed up American dollars in gold. A good thing about this was that it provided exchange rates that were consistent and predictable. The government couldn't print new money unless it had enough gold to backup the currency. The problem is that when money is backed by gold and it has a problem like in the Great Depression, foreigners want gold instead of money. Then the government has to increase interest rates, although that is the opposite of what people need during a depression. So the gold standard is no longer in use as it failed during the Great Depression.

Kiera Ziegler, Chapter 11, Question 7

This chapter caused me to look at currency differently. I now see that a country wants to maintain the value of its currency not only for its own economy but so that's it is appealing to the global economy. He used the example that if Mexico's currency had stronger buying power we would exchange our money for pesos so we could purchase more with less and live better.  When Wheelan said "National borders are political demarcations, not economic ones," this provided me with am entirely new view on global economy. The borders make the world seem separated and disconnected; however one thing we all have in common in money. Also, when Wheelan talks about currency exchange, I always though you would just exchange a dollar for a dollar, however that is not the case. The value of each currency must be calculated to know how much to exchange.

Harris Worthman, Chapter 11, Question 7

While I was reading chapter 11 of Naked Economics there was about two pages about the importance of the exchange rate between countries. If the correct value of exchanging different currencies is not equal then it is liable to have those that take advantage of the system to make a profit. It is also important to exchange for the right value in another currency because, in one instance, the author, Charles Wheelan, went to China and though he exchanged 100 dollars of his money for what it said it should be exchanged for in his book, he realized his book was outdated and he ended up only receiving about 13 dollars in return. The exchange rate is important not only for the average person but for governments as well. Many governments are afraid that when they receive money from another government that they recently created more money just to pay off their debt. That makes the value of the money they payed them to down.

Jonathan Webb, Chapter 11, Question 6

   When he said that, "in a modern economy, more than three-quarters of goods and services are no tradable." that was a big surprise to me. Because of the examples he was talking about earlier in the chapter about the car trades and my own experiences in my life I thought it would be that number just for tradable goods. The whole Mumbai example got me thinking just how relative the world is. I mean, some who is struggling here in the United States could have the same kind of benefits as someone would who is doing successful in a 3 world country. But the fact is, would they be happier in the U.S. or there. Or if you think the oppisate way, some famous rapper in Africa is getting all these benfits, but if they came over to the U.S. and earned the equivalent as what he was earning in Africa, it obviously wouldn't be as nice. So again the question would be, would that rapper rather live in Africa getting his benefits there, then"highlife" in Africa but worse conditions or to the U.S. making less and not getting the same benefits but living in better conditions with more opportunities?

Max Hobrough, chapter 11, Question 7

In chapter 11 they talk about international markets and how they operate and how they can relate each other. I think the most interesting section of this chapter is how they actually use the Big Mac Index all over the world to compare prices in the economy. This is an easy product to do a comparison because all over the world it has to be made with the same ingredients. This meathod can determine how strong an economy's currency is compared to other countries. Now though this is not as effective because different economy's have been crashing and the fast food lifestyle has gone down the drain. Another part of this chapter that seemed interesting was that Pepsi made a barter agreement with Russia for vodka because their currency was so soft and weak that it would be worthless for Pepsi to use. This system can be very effective because it can cut out all of the negative externalities for the most part, when it comes to the rate of exchange in currency. If more people started to do this they could get what they wanted without all of the unnecessary eceonomics effects.

Zach Du, Chapter 11, Question 6

In Chapter 11, the part which talks about relationship between China and US really caught my attention. "China's export-oriented development strategy depends on keeping the renminbi relatively cheap. To accomplish that, Chinese government recycles accumulated dollars primarily into U.S. treasury bonds, which are loans to the U.S. federal government. Both parties get what they want (or need), at least in the short run" (266). James Fallows stated that:"Without China's billion dollars a day, the United States could not keep its economy stable or spare the dollar from collapse" (266). But on the other hand, "The Chinese have it worse. Suppose America's debt burden grows beyond what U.S. taxpayers can (or are willing) to pay back. The U.S. government could default- simply refuse to honor its debts" (267). This means if US prints more money and creates inflation, the debts would automatically lose its value. What's more interesting:"In fact, every person in the United States has over the past 10 years or so borrowed about $4,000 from someone in the People's Republic of China" (267).

Gunnar Nelson, Chapter 11, Question 6

I find it interesting how Wheelans last statement ties into the relationship between America and China, which we are in an unhealthy economic relationship. The bulk of China's economic success is in the main production of exported goods, in the short run- both economies get want they want. China uses exports to generate jobs, GDP, and wealth, and America gets loans to add onto the national debt. " The United States gets loans from China to buy its exports." As a debtor country, we are vulnerable to the demands of China's creditors "America has a borrowing habit; China feeds it." I have always wondered how American policy of debt has effected other countries. We are in a difficult position with China because of our large amount of debt. In order to pay off our debt without infuriating tax payers would be a dirty task, your two main options are 1. Inflate it away, which would hurt both economies, or 2. refuse to pay the debts, also extremely detrimental to international, as well as national economics and social health. However through cooperation, nations can plan ahead to decide on the smartest way for an economy to act, which gives a small sense of relief.  

In the last passage of Chapter 11, Wheelan makes the comparison of baseball to international economic health. Baseball is a zero-sum game, where only one team can take it all and win the World Series, where as international Economic health is a different story. "All countries can become richer over time", as nations cooperate with each other, the world gets richer at the expense of no one.

Olivia Barr, Chapter 11, Question 6

While reading this chapter, I found the section about the gold standard to be very interesting. Although I've understood the concept of a backed currency for a long time, it didn't occur to me that using a backed currency could have such unstable effects on the economy. I found it troubling to learn that the gold backed currency used at the time of the great depression contributed to the depression. Previously, I've been told that buying in credit was the key problem leading into the recession, however after reading this chapter, and learning about the gold standard, it is very clear to me that the gold standard limited the number of options to fight the economic downturn. Ma also found it interesting that Argentina used a dollar backed currency for some time. All in all these sections of the chapter made it clear to me that using the gold standard, or backing one currency with another will likely lead to economic downturn.

Madison Webster, Chapter 11, Question 6

The part that most struck me was titled "Funny Money". I thought it was super interesting how when Berlin was split into East and West by the wall, East Berlin had its own currency. This sounds reasonable of course, due to the distinct separation, but the fact that the currency was only allowed in that part of Berlin, in that part of Germany, in that part of Europe, in that part of the world! The money was completely worthless anywhere else!! Not because the exchange rate was bad, but because no money was allowed to be taken out of the area. If leaving, an account would be started to save the money for when you return.

 I think this is an excellent example to reveal the importance of having an exchange rate. The world is separted into many countries but is interconnected through location. Currency, language, food, appearance, values are just a few of the aspects that differentiate cultures. A key way to interconnect the world is to have an exchange rate for currency. If East Berlin would have established this idea, people could take there East Berlin money and exchange it for an equal value in any other currency of the world. This makes buying, selling, trading, etc. way more efficient and convenient.

Darby Quast, Chapter 11, Question 6

The description of the gold standard stood out to me while reading chapter 11.  At first, it seemed as though this was a logical solution to coordinating exchange rates.  Having a gold standard would create extremely predictable exchange rates.  If  an ounce of gold is worth 10 dollars in America, and worth 1 Yen in Japan, you would therefore receive ten dollars for every Yen.  To me, this seemed to simplify an incredibly complicated process.  It also makes sense to me that the dollar would have some intrinsic value.  The fact that the dollar can be worth close to nothing is a hard concept to grasp.   When it is tied to something like gold, it gives it value.  There are many problems with this system, which is why it is not used in the modern world.  The federal reserve would not be able to devalue he currency, which is a major way to fight off a recession.  They would also be more likely o raise interest rates and cut spending to try and protect their gold.  Both these things would hurt an economy  in a recession rather than help it out of one.

Nathalie Heidema, Chapter 11, Question 6

There were several things that I found interesting in this chapter. I chose Goeorge Sorosis` one billion in a day and the Big Mac Index.

When Britain was in a recession, the value of the pound fell and international investors withdrew from from their investments in Britain, selling the pound and looking for other opportunities elsewhere. With currency it`s similar, it`s all about the supply and demand. As the demand for pound decresed, so did its value. The government could either "use its reserves of other foreign currencies to buy pounds" or it could raise interest rates, so it would attract foreign investors. However, as we know, raising interest rates is the opposite that one wants to do when in a recession, as it makes the economy even worse. Anyways, even the ERM could not help the fact that the pound was falling and eventually the British government stopped trying to defend its currency and withdrew from ERM. The pound fell 10%, which is the source of Sorosis` gain - a successful bet that made him a billion dollars in one day.

To compare the value of currencies between countries and "evaluate the exchange rates relative to what PPT would predict", the Economists created the so called Big Mac Index. As the McDonald`s really conquered every corner of the world (even the small town in the mountains where my grandma lives), they found it as a good way to find out if the currency is over or under-valued. That seems pretty fair, but the example shows that it doesn`t always work out that well. When American and Chinese Big Mac were compared, the result was that a dollar buys 3,5 renminbi. However, the official exchange rate was $1 to 6,38 - which is quite a difference. That says, even if the Big Mac appears in more than 120 countries, we shouldn`t let it have the final world of the exchange rates between countries.

Taylor Bye, Chapter 11, Question #6

You may have heard Michael Jackson's and Lionel Richie's "We are the world" before. All about how we're all connected. Well it's not only our human souls that find connection, but it's our economies too. The country of Britain found that out in a most brutal way on September 16, 1992, when their currency, the pound, lost ten percent of its value. This was due to a system called the ERM or the Exchange Rate Mechanism, which was supposed to manage large discrepancies of European countries' currency. This worked for a while but, like with inflation, values of each currency fluctuate.

I find it very interesting not to mention metaphorically resonant that the world's economies come down to one important thing: value. What we hold value in, we try to capture for ourselves. We try to understand subjects that are of some worth to us. We try to hold onto things that are most precious. Both life and money have these astonishing fluctuations of value. To one person, something may not be as valuable as it is to another. Such with countries and their economies. With this idea of value found both in this chapter and the one before, I am opened up to seeing money as more than just cold hard paper and coins. Money represents something. It represents what we put value in. And this value, whether it is worth more to me than to you, dictates what I do with it. In fact, it dictates what entire nations do with it.

Angela Scharf, Ch.11, Q.7

What I learned in this chapter is the basics of international exchange. The world currencies are no different than national goods and services in that they essentially "change prices" on a supply and demand curve. If the demand of currency is down, so does the value. When it comes to international trade, the concept is slightly more complex, however when broken down is not unlike national trade. It is just capitol that extends beyond the international borders. The issue in international exchange is that not all mediums of exchange have and equal ratio in value. Furthermore, because most modern economies don't have currencies with any intrinsic value, the rate at which one currency can be exchanged for another is called the exchange rate. This also carries over into the Purchasing Power Party (PPP) or the idea that one dollar that can purchase a set amount of goods and services that can then be translated into another international currency based on how much of their money is used to buy those same goods and services. For example, if 50 American dollars bought a certain good, and those same goods cost 75 Japanese yen, then it could be implied that 75 yen is worth roughly 50 American dollars. Another factor that has to be recognized is the difference between the nominal exchange rate (as earlier stated-the rate at which one currency can be exchanged for another) and the real exchange rate (which takes into account inflation).

Sophie Gunderson, Chapter 11, Question 7

The currency that belongs to each seperate country is unique and symbolic (with the exception of the euro). Most countries print their most infamous leaders in their coin and paper currencies thus showing the strength and prosperity of that country publically. In a way, a countries currency could be as unique as a nation's native language. Fortunately, we are able to translate most languages into another language and for currency, our translator is the PPP or purchasing power parity. 

Through Chapter 11, I was able to learn and understand more about the translation that occurs between the different countries and economies of the world as well as why that is. My mind automatically began comparing the different currencies to languages and as I was figuring out an easier way to translate the currencies than the PPP, Charles Wheelam introduced the Big Mac theory. To me, this way of thinking was essentially equivalent to the English mid translator at the annual United Nations meeting. Due to the fact that the Big Mac is served at many places around the globe, the prices are easy to compare for most countries. Although there are some variations on the actual price it's being sold at and what the PPP says it should be, this mid translator is the theory that seemed most logical to me.

The ins and outs of global economies and currencies are incredibly complex and most likely need many year of schooling to fully understand. However, what I understand from reading twenty pages of an Econ book is that economies fluctuate and affect other nations economies daily, yearly, and will continue to. The most important thing overall is making sure Iceland gets Big Macs back and thus can use their mid translators again!

Taylor Bye, Chapter 10, Question #4

Isn't it scary to think about something we've previously put so much value in can suddenly become worthless? Well, to me it is. And that thought is put into nightmarish reality with inflation. It urges people to spend hastily and almost mindlessly just to get the biggest bang for their buck while they still can. Yet when inflation deflates back to a somewhat normal state, people may see that the things they spent in their inflation-induced shopping spree can be as worthless as the cash they used to buy them with. Inflation can bring the whole nation to its knees within hours, and then leave it in disarray after it's done vomiting everywhere.
So how can we decrease this problem that can leave the whole nation in a shambles? One way is the Federal Reserve. In order to fight inflation, the federal reserve can heighten reserve rates, discount rates and also sell bonds. It's these actions that keep the nation from really slipping under when inflation hits. Thanks to the Federal Reserve, America has not experienced hyperinflation. And also thanks to the Federal Reserve, we can all start putting faith back in the worth of things again.

Elena Gutierrez, Chapter 11, Question 6

The most interesting, and fun part of this chapter for me was learning about the European Exchange Rate Mechanism, Great Britain's recession and devaluing currency in the 1990's, and George Soros' billion dollar gain in one day. Wheelan's explanation of what the exchange rate between currencies is (the value of a country's currency relative to the value of another country's currency), and the example of an actual exchange rate that Wheelan included (Britain's 1 pound equaling 2.95 German marks)  really helped me understand the importance of exchange rates, and what that means to have a strong valuable currency. Wheelan also included how the value of currency is measured (the supply relative to the demand for the currency.)

I thought it was really interesting how a man named George Soros made a billion dollars in one day by monitoring the value of Great Britain's currency during their recession in the 90's and taking out loans based on the decaying value of the British pound.

Basically Soros waited for signs that the British pound was going to drop tremendously in value. Right before it did Soris took out a loan for basically 10 billion pounds. Soros then exchanged these 10 billion pounds for 10 billion German marks (assuming that the exchange rate for British pounds and Germany marks was 1 pound = 1 mark) Then Soros waited for the value of the British pound to drop. When it did drop, it dropped by 10% causing the exchange rate for British pound and German marks to be 1.10 pounds = 1 mark.  Soros exchanged his 10 billion marks for 11 billion pounds. Then Soros paid off his loan with 10 billion of his pounds, and walked away with an extra 1 billion pounds.

Maddie Binning, Chapter 11, Question #7

I had never realized that strong currency did not necessarily mean a healthy economy. It's an easy conclusion to jump to that a strong dollar meant a strong economy, but through this explanation, it's easy to see what that isn't true. In addition, the explanation as to why one single currency wouldn't be a realistic, functional way to control an economy opened my eyes to a new way of thinking. I had always wondered why we didn't simply have a universal currency in other to do away with exchange rates and such. It makes sense that having a single currency doesn't allow for adjustments in order to maintain differing regional economies. The adjustment that would be made to reduce inflation would only exacerbate potential recession in other localized economies, therefore rendering a universal currency illogical and unrealistic.

Hammer Rita, Chapter 11, Question 7

While reading chapter 11, I kept asking myself why doesn't every country just have the same currency since inflation, exchange rates, etc make transfers seem extremely complicated and often times result in a bad deal for someone. On page 262, Wheelan adresses this question by saying, "There are benefits to broadening a currency zone... A single currency across Europe reduces transaction costs and promotes price transparency," Its a good thing that Europe doesn't have the struggle of exchanging currencies all the time anymore; however, Wheelan goes on to say, "countries that share a currency with other nations...give up control over their own monetary policy." I found it interesting that if all countries did actually have the same currency, the world would have an extremely hard time growing economically because if one country or area is heading towards a recession and could benefit from lower interest rates, the other areas that are thriving or experiencing severe inflation (and could benefit from lower interest rates) would suffer. This perhaps would create huge tensions and disagreements amongst different nations about how the economy should be operating. Overall, the idea of having one currency wouldn't work.

Miriam Scheel, Chapter 11, Question 6

In this chapter Wheelan talks about several global economic issues, but it is his summary at the end of the chapter that struck me. Especially these sentences: "Only one team can win the World Series. International economics is the opposite. All countries can become richer over time, even as individual firms within those countries compete for profits and resources." (p. 269)
In my head there has always been this underlying assumption that if one country gets richer others get poorer. I had the same assumption about humans, that in order for one person to become rich that person had to steal (more in a figurative sense of the word) the wealth from other people. Now this rule is as I found out in this class is not directly true, and I could have imagined that this also counts for the global economy, but I never thought about this part and I never thought about the consequences of this new truth: that every economy could grow at the same time. Given this statement, the goal of global wealth seems a lot more reachable, it seems like if there could only be the right people in the right position, this goal can be achieved. Now, I know that these right people may not be able to exist, and that our current system doesn't particularly favor working hard for someone else's outcome, but it seems like a very nice thought that, in theory it could happen.


But then of course wealth is somewhat relative and doesn't at all guaranty happiness.

Jona Bakke, Chapter 11, Question #6

One passage that struck me as particularly significant is when Wheelan explains the ongoing predicament of the United States and China. While I knew that there was an unbalanced relationship between the two economies, I did not realize the extent or possible consequences of the situation. The United States is indebted to China for about a trillion dollars. Wheelan describes the situation as an "unhealthy symbiotic relationship that has the potential to come unglued at any time" (Wheelan 266).

The United States has reason to fear from the unbalanced relationship with China because it is the debtor nation, relying on loans to maintain a strong economy. If China were to break this relationship, our economic position could plummet. However, Wheelan states that the Chinese have more reason to fear. The United States could simply choose not to repay its debts, or increase inflation in order to lessen the value of them. Wheelan says, "If someone owed me a trillion dollars and also had the authority to print those dollars, I would spend a lot of time worrying about inflation" (Wheelan 267).

I was not aware of how large of a role both China and the U.S. have in each other's economies and what great damage could occur. Wheelan states that the current relationship between China and the U.S. will come to an end, although we don't know when, why, or how, which imposes fear on both nations as well as on the rest of the world.

Harris Worthman, Chapter 10, Question 6

In chapter 10 of naked economics Charles Wheelan devalues the dollar in a single paragraph. Stating that the bills in your wallet are "just paper." He also stated that if you were on an island and had 1 million dollars you would quickly perish. If you were on an island and had the same value in gold you would be no better off. Money is an item used for trading, it's not supposed to have other uses. I understand his point but we are not children and money is a great idea. It was designed to be useless.

Kiera Ziegler Chapter 10 Question 6

It unnerving to me that economists don't agree on how the Federal Reserve should manage the money supply or why it affects our economy as much as it does. I always had the perspective that there's has to be a solution or an easy way to regulate money and it's effects on the economy; however, that's not the case. Wheelan say, "getting it wrong can have disastrous comsequences," (220). If the federal reserve makes a mistake can affect the world as Robert Mundell argued. He claimed that if the price of gold had been raised in the 1920's and 30's and pursued price stability there would have been no Great Depression, no Nazi revolution, and no World War II. As in many other things in economics hind sight is often 20/20, to me this is the scariest thing about economics often times it's hard to know where you are or what's going wrong in the moment or to know the effect of something on the future economy.

Max Hobrough Chapter 10 question 7

This chapter mainly talked about the value of money in all of its forms and how they can be used and the flow of this currency. The part that really interested me was how when you look at an object that you bought a long time ago for cheap then you look to buy one these days and it is so much more money. This strength of the domestic American dollar has gone down in value over time due to inflation and the amount of currency that is actually available for the public. The more currency we produce the more the dollar goes down in value. An example of this is buying bonds, it is almost anticipating inflation of the dollar because really if you look at the actual amount of a bond you bought a while ago in most cases you are just getting the same amount of money it would be worth when you bought it. So some people look at this and are mind blown because a bond they bought a while ago is "worth" so much more than it they bought it for, but it is really just inflation of the dollar. There is a way we can fix this, my idea is that we make our currency actually have self-worth and not just a meatless piece of paper or zinc. This would actually give value to the dollar which would secure strength for it in the future. 

Griffin Pontius chapter 10 question 7

       Of the things the discussed in this chapter, the idea that economic growth has a speed limit, was a very interesting analogy.  When we go "over" this economic speed limit, we risk inflation.  In order to curtail this,  We raise interest rates.  The exact oppisite can be said if we go "under" this speed limit; if we go under the speed limit, we risk deflation.  Our combatant to this is to lower interest rates, by doing this, we should return to the legal limit of about 3%.
       As I read this chapter, my understanding of how much power the federal reserve has and how they can control the economy.  The author talks about how after the 9 11 attacks, the Federal Reserve realeased a two sentance statement that cut intersest rates by .5%.  Also by reading this chapter, I learned how important the federal reserve really is, up until reading this, I had heard the term "Federal Reserve" kicked around, and on the news, but I had never really understood what it was.

Scott stewart, chapter 10, question 5

The issue of the federal reserve and what the federal reserve should do is an extreemly controvesial subject. On the news we always see people complaining that the should/shouldn't have done this. The author helped illuminate the great importance if the federal reserve and why its actions are so controversial. The federal reserve works to maximize our economy without causing inflation, and to keep up going at our economic "speed limit." Because of the importance of this job, everyone wants it to be done differently.

Chapter 10 Q-2

Overall chapter 10 blew my mind. It's complexities are so deep that it's no wonder why we struggle every year with this same concept of inflation. In chapter 10 Wheelan mentions a lot about how inflation can really impact my life. The biggest impact of inflation on my life is how it hurts my "buying power." As inflation increases the value of each dollar decreases making it less powerful. This simply effects everything. Now I worry about retirement. When I'm older and want to save for retirement, as I save inflation causes that savings to be worth less and now I have to put more money in because the cost of goods and services will also increase with inflation. Wow, this really could screw some people over and it has and will continue to. Inflation can also help people interestingly. If someone is in debt and owes someone a lot of money then unexpected inflation occurs, what you owe them is less now and isn't as bad anymore hurting the person needing to be paid back but also benefiting the debtor. I used to always ponder about inflation as a kid without knowing what it actually is. I would say "let's just make a bunch of money and all get rich!" I think this thought might cross a lot of kids minds but soon they'll learn from Mr. Hoffner of Minnehaha Academy how deeply inflation effects ones life.

Zach Du, Chapter 10, Question 6

I found the part when Wheelan encountered a farmer and showed the principal of inflation was especially appealing. "Somewhere outside of Des Moines, I began chatting with a corn, soybean, and cattle farmer. As he gave me a tour of his farm, he pointed to ahold tractor parked outside the barn. 'That tractor cost $7,500 new in1970,' he said. 'Now look at this,' he said angrily, pointing to a shiny new tractor right next to the old one. 'Cost me $40,000. Can you explain that?'" (230). Actually, the answer to his question is easy to explain: inflation. People often confused by simply looking at the two numbers, but not compare the real terms. Now, the farmer could afford this brand new tractor by doing less amount of work than before, which means the price did not go up, but instead it went down.

Darby Quast, Chapter 10, Question 6

One thing that stood out to me while reading chapter 6 was the extreme importance of the Federal Reserve.  I found it interesting that despite this importance, the system is only made up of 12 banks and a seven-person board of governors. Wheelan says, "The Federal Reserve has tools with more  direct impact on the global economy than any other institution in the world, public or private." Controlling the growth of the economy is a very difficult task but a necessary one.  If it is not done right, it can lead to things like hyper inflation and recessions.  If done well, it can lead to growth and sustainability.  I found it very interesting that this job was left up to 7 people and a couple of banks.  I would think that because of its difficulty there would be many more people involved.

Julia Carle, Chapter 10, Question #7

Before reading chapter 10, I didn't know that the Federal Reserve System is made up of twelve Reserve banks spread across the country. I feel like I probably should've known that, but I didn't. I've never heard of Ben Bernanke and didn't know there was a chairman of the board of seven governors either. To be honest, I didn't even know what the federal reserve banks did until now, it was just a term thrown around before. It seemed like a complicated idea, so I strayed away from it not giving a care as to whether I knew what it meant or not. Now I know that it does the major works for the financial system of the U.S. Adding this to my knowledge makes me feel more confident in the U.S. Financial system and has introduced many new thoughts and ideas into my brain.

Maddie Binning, Chapter 10, Question #7

The concept presented about the "speed limit" of the economy is one that was completely foreign to me. It seems like more growth would be better. That sounds like a logical conclusion. However, the idea that inflation is a result of that unregulated growth makes it a much more complex issue. This chapter gave me a new way of seeing growth and the calculation of interest. Prior to this reading, I thought the assignment of interest was completely random. I thought that companies would calculate interest like prices, through the consideration of demand for service and competition in the industry. I never realized that the Fed would have such an impact on those rates. These concepts as whole bring light to why the business cycle exists and helped me understand why uninterrupted growth is not truly possible.

Sophie Gunderson, Chapter 10, Question 2

In this chapter, Charles Wheelan discusses the importance of the Federal Reserve and how the people that are in charge of this system have the ability to significantly control the economy. When they see fast inflation happening, they raise the interest rates to offset and halt this inflation. When inflation is happening at a very low pace (it is supposed to be rising at around 3 percent each year), the Fed lowers the interest rates so more people invest, borrow, and purchase. This roller-coaster of rates is an ongoing, stressful, and very demanding job when it comes down to the attention economists have to pay to the prices of everyday items. Wheelan also discusses money and a monetary unit. It makes me feel a bit uncomfortable that money really has no value. The only value that is behind it is our faith that someone else wants it. So, what if everyone decides to stop wanting it and start using it as wallpaper? The fact that this is at all a possibility (however far fetched it may be) makes me uneasy with money in general.

Overall, the problem of inflation with the value of the dollar decreasing is something that will be relevant and directly impact me throughout my entire life. It happens every year and slowly every day. With the dollar decreasing in value, how can I be confident that it will be of any value in my wallet than a penny in thirty years? I may be lying awake at night pondering this. Thankfully however, it is now beneficial to understand how the Fed influences and regulates the economy mainly through interest rates based on economic observations.

Angela Scharf, Chapter 10, Q.2

The issues raised in this chapter affect our lives directly, but in a more general way. Robert Mundell infers that bad monetary policies can launch any nation into a detrimental state. He uses the example of World War II and the Nazi revolution, and although these statements seem rather melodramatic, he has an interesting point. We are dependent on money. Not because of its worth (because it doesn't actually have and inherent worth) but rather because of its purchasing power. As referenced to in the chapter, the Federal Reserve controls the money supply to the economy therefore establishing credit to the economy. If markets crash, the Fed injects money into the economy to avoid freezing spending. If the market spending needs to slowdown, then the Fed raise interest rates. This also implies that the Fed can use monetary flow to avoid or counter act disasters from happening, such as WWII, given the Federal Reserve calculates the right amount of credit in order to keep the economy growing. There is a limit to how fast the economy can grow however, (how low the interest rates can go) because eventually the consumer demand will exceed the amount the economy can produce. This is how inflation results, further establishing the fact that enacting monetary policies and interest rates in the markets is a meticulous process and can affect our lives directly.

Nathalie Heidema, Chapter 10, Question #7

In this chapter I learned about the Federal Reserve, its function and importance.

To begin with, Federal Reserve (or Fed) is one of the most powerful and influential institutions on the global economy in the world. It has a great power and affects the lives of Americans in many ways. Why? Because it controls the money supply. Namely, it is the 'tap of economy' and when the tap is wide open, interest rates fall and people spend more freely and borrow money easier. The Fed regulates commercial banks and supports the banking infrastructure. If they want to stimulate the economy by lowering the cost of borrowing, they can offer discount rates ( although banks prefer to borrow from other banks first) or they use the federal funds rate (rate that banks charge each other for short term loans). Fed can also do the opposite. It can raise interest rates and the cost of borrowing funds so that we spend less. It's significant role is to 'facilitate a sustainable pace of economic growth', it must keep some sort of balance. The people who are in charge of this (Ben Bernanke, 12 Reserve Banks and the board of governors) must therefore cleverly predict (or know) what impact a change in interest rates will have on the economy.

 Comparing Ben Bernanke to a God seems too strong for me, but he definitely is one of the most influential persons in the economic (and therefore real) world.

Elena Gutierrez, Chapter 10, Question 6

Straight away in chapter 10 Wheelan writes about the importance of "effective monetary policy" (Wheelan 220.) Wheelan also references Robert Mondell who is famous for his theories on causes of inflation and deflation in the 1920's and 30's. Mundell won the Nobel Prize in 1999 for his theories on the effects of an insufficient monetary policy on the long lasting deflation in the 1920's and 30's. Mundell even argued that the "bungled" monetary policy instilled throughout the early 1900's ultimately caused the Great Depression. I thought this was so interesting and perplexing, so I decided to look up Mundell's Nobel Prize lecture from 1999, in order to learn more.

The first thing I didn't understand was what caused the deflation in the United States that caused the Great Depression. Mundell proposed that because of Great Britain's "deficit spending" during WWI (which went straight to the United States) they were pushed off of the gold standard. When all of that gold came to the United States, the newly founded Federal Reserve monetarized the gold in a way that caused the dollar to double in price level and the value of gold to decrease by 50%. After WWI European countries switched back to the gold standard, but the dollar price was still at a 40% increase causing a world wide deflation in the value of gold. This deflation caused the demand of gold reserves to go way up, and prices of goods and services to decrease. The monetary distribution of gold was also facilitated poorly. Half of the world's gold supply was in the United States.

I still don't understand this completely,  but Mundell proposes that the ultimate cause of the Great Depression was a shift in aggregate demand, and a shortage of money throughout the U.S.

A link to the page I found Robert Mundell's lecture on:
http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1999/mundell-lecture.html

Madison Webster, Chapter 10, Q 2/6

The quote that Wheelan stated that struck me the most was "The most instructive way to think about inflation is not that prices are going up, but rather that the purchasing power of the dollar is going down".

This affects my every day life in the sense that I use money regularly. My family uses money to buy food, clothes, necessities, wants, bills, taxes, etc. I obviously want to get the most for the money I spend. Wheelan talks about the value of money, he says it is worthless. All it is is paper! However, there needs to be a common unit of trade in order to compare the value of different items for purchase. This is weird to me because a $100 bill seems to be worth so much yet it is worth so little. I would convey that inflation is a scary things. You could be a middle class member at one point and be poor the next. In some countries, the value of the dollar changes everyday!! This is incredible to me. 

Going back to the quote I mentioned up top, Wheelan makes an excellent point. Since the dollar has such little value, it isn't important to think about the prices of items according to money, but rather how much you can buy for a dollar. A dollar buys less than it used to. You used to be able to see a movie for 19 cents and now it is $10! "A paper value only has value because it is scare"... I would also argue that it has value because it is the unit of trade amongst our nation.

Jona Bakke, Chapter 10, Question #7

People would expect the government to always be doing everything it can to prevent and stop inflation. However, this is not always the case. Something interesting that I learned while reading this chapter is that corrupt governments will sometimes intentionally cause inflation for their own benefit. This often occurs when governments are in large debt. By allowing inflation to increase, they devalue the money that they owe and therefore make it easier for themselves to pay it back. However, the increase in inflation hurts the average citizen, as well as whoever loaned the government money.

Governments also benefit by imposing the inflation tax. This tax involves the printing of more money and the using of this new money to pay for a government function. Therefore, the government indirectly taxes people by devaluing their money instead of taking money directly from them.

I never knew prior to reading this chapter that the government may intentionally cause inflation for their own good at the cost of everyone else. This notion seems backwards since we would hope that the government is always working for the good of the population.

Olivia Barr, Chapter 10, Question 7

After reading this chapter I have gained a better understating of the dollar. On the surface, the dollar seems to have a specific value, and it is something that is used to compensate someone for the value of the item you are purchasing. In reality, the dollar has no intrinsic value. I was a little shocked in the book when it said that a can of mackerel is better than a dollar because if the market fails, you can eat mackerel but the paper and linen in a dollar bill have no nutritional value, or any value if there are not other people who want dollars. My dad often says that "that shirt is paid for by my sweat" and I never really put any value to that statement, however this chapter has given me a new understanding of it; people pay him in dollars (of now intrinsic worth) for his work because paying him in mackerel would make it very difficult to purchase clothing from Nordstrom because they don't have any need for mackerel. Now I will think of money less as a piece of paper with a set value, but something that is earned through hard work and allows people to get exactly the goods and services that they desire without having to go through hoops of bargaining with various goods that have their own intrinsic value.

Miriam Scheel, Chapter 10, Question 6

Every time we learn about inflation, recession and/or the Great Depression there is this solution presented that seems to be so wise and true and always working: Simply increase the government spending; give the people money to spend. It sounds like "Now we know how to deal with these unlucky problems. We are not going to make the same silly, childish mistakeBs they did back then." But in reality it is a lot more complicated and complex; a lot more can go horribly wrong, and we are by far not as superior and omniscient as it seems. We know few about what causes the cycles of recession, and what exactly makes them turn into a depression. And we can't know if this universal cure will heal the economy each time.

Wheelan emphasizes this point (besides other important points) when he says: "Monetary policy is tricky business. Done right, it facilitates economic growth and cushions the economy from shocks that might otherwise wreak havoc. Done wrong, it can cause pain and misery. Is it possible that all the recent unconventional actions at the Federal Reserve have merely set the stage for another set of problems? Absolutely. It's more likely, at least based on evidence so far, that the Fed averted a more serious crisis and spares a great deal of human suffering as a result."

He talks about how, when done wrong the same method can cause suffering, even if, when done right it helps to a healthy and strong economy. The problem here is the thin line between right and wrong. We can't know ahead of time on which side of the line we are standing. Wheelan says that the method that eventually prevented a likely second Great Depression could as well have caused the same one to happen.

Rita Hammer, Chapter 10, Question 6

While reading chapter 10, I was struck by the difficulty involved with trying to control economic growth, or inflation. Wheelan introduces the Federal Reserve and elaborates on what exactly it is that they have to do. He numbers off "what exactly the Fed is charged with doing." He says,

"Bear in mind: (1) We do not know the economy's exact speed limit. (2) Both the accelerator and the brake operate with a lag, meaning that neither works immediately when we press on it...(3) Monetary and fiscal policy affect the economy independently, so while the Fed is gently applying the brake, Congress and the president may be jumping up and down on the accelerator..(4) There is the obstacle course of world events--a financial collapse here, a spike in the price of oil there. Think of the Fed as always driving in unfamiliar terrain with a map that's at least ten years out of date."

This description gave me anxiety just by reading it. Having a job within the Federal Reserve calls for no mistakes and a whole lot of "Im not sure's." If the job is done wrong, the outcomes will affect a large population of people in a really negative way.  If the economy is being slowed down, we are wasting the potential it has to grow. If the economy is growing too fast, "workers are scarce; capital is scarce; technological change proceeds at a finite and unpredictable pace." Wheelan concludes that "Economists reckon that the speed limit of American economy is somewhere in the range of 3 percent growth per year...and the phrase 'somewhere in the range' gives you the first inkling of how hard the Fed's job is." Overall this introduction the Federal Reserve's job stuck me as being an extremely tedious, profound, yet crucial career. The job can have significant consequences and was accuratley pointed out as "the economic equivalent of brain surgery."