Sunday, May 17, 2015

Unit 7 Notes

A BOP "Chart" (4/9/15)




Notes (4/13/15)

BOP: Balance of Payments

Official Reserves: 
  • Foreign currency holding of U.S Federal Reserve System
  • When there is a balance of payments surplus the Fed accumulates foreign currency and debits the balance of payments 
  • When there is a balance of payments deficit the Fed depletes its reserves of foreign currency and credits balance of payments 
  • Official Reserve 0 out the BOP
Active v. Passive Official Reserve:
  • U.S is passive in its use of official reserves. It does to see to manipulate dollar exchange rate 
  • People's Republic of Change is active in its use of official reserves. It actively buys and sells dollars in order to maintain a steady exchange rate with U.S

Notes (4/14/15)

Trade Deficit: 
  • Imports > Exports
Trade Surplus:
  • Exports > Imports 
Good Exports + Good Imports

Current Account: 
  • Balance of trade + net investments + net transfers 
Capital Account:
  • Foreign purchases of U.S assets + U.S purchases of assets abroad 
Official Reserve: 
  • current account + capital account
Calculate Goods & Services:
  • Good imports + service imports 

Notes (4/27/15)

Purchasing Parody:
  • When currency rates are set by international markets, changes would be based on actual currency power of currencies 
  • Ex.) If U.S $ to Europe is $1.50 to 1 then each $1.50 will buy 1 Euro. However, if item in U.S cost $1.50 and then cost more/less 1 Euro, the parody is lost. Markets will adjust quickly in floating rates or pressure for 0 will occur in fixed rates 
Why do we exchange currencies?
  1. To invest in other countries; stocks and bonds 
  2. Sell exports and buy imports 
  3. To build factories or stores in other markets 
  4. Hold currencies in bank currencies for further imports, exports, or business loans 
  5. Speculate on currency values 
  6. Control excessive imbalance; balance will come from BOP 

Absolute Advantage v. Comparative Advantage (4/29/15)

Absolute Adv.:
  • Individual: exists when a person can produce more of certain goods/services then someone else in same amount of time 
  • National: exists when a country can produce more of a good/service then another country can in the same amount of time 
  • Faster, more efficient
Comparative Adv.:
  • Individual/National: exists when an individual/nation can produce a good/service and lower opportunity cost then another individual/nation
  • Low opportunity cost
Input Problems:
  • The country/individual that uses the least amount of resources, land, or time has the absolute advantage 
Output Problems:
  • The country/individual that can produce the most has the absolute advantage. The country/individual has lowest opportunity cost has comparative advantage
  • Deals with production
Comparative:
  • Input- is/not
  • Output- not/is
Absolute:
  • Input- Less
  • Output- More


4 comments:

  1. Needed the explanation on why we exchange currencies , it was what I needed to connect everything together

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  2. You're notes are very well put, but I have one suggestion. When explaining Absolute/Comparaive Advatage, I think it would have been better to include examples. Other than that, great job!

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  3. I think you're notes are great. I think explaining active vs passive official reserves more would be a lot better, like how is U.S. more passive.

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  4. These notes are not as detailed as should be as far as Foreign Exchange Market and the Comparative Advantage notes. More examples may have enhanced these notes. What exactly is Balance of Payments? What is the purpose of it?

    ReplyDelete