Thank you!

Thank you for reading my blogs on all things Macroeconomics. (Thank you John Maynard Keynes!) I hope you enjoyed and were able to learn just a few of the extremely prevalent topics in economics. (Thank you Adam Smith!)

Emma S :)

Topic 8

The eighth and final main real-life topic is the modern banking system.

    First of all, the Fractional Reserve System = Ms > MB. Reserves should be thought of as amounts of deposits (a fractional value) that banks keep within other banks. Another important lesson to note is the RRR: Required Reserve Ratio is a fraction of deposits that banks are required, by law, to keep as reserves. This is all decided by the Central Bank of the country, and the remainder of this is loaned out. Below is a real-life example of how this continuous process works (it may continue to go on and on, but the following example is involving a total of 3 banks):

Speaking of the Central Bank, there are 5 noteworthy points about them:

1) They are the ultimate money authority.

2) They are in charge of monetary policy.

3) They are known as the Bank of Banks.

4) They regulate and monitor the whole banking system.

5) In the United States, they are known as The Fed. 

This is all very interesting, and it is important to know how this system works whether you work in a field relating to banking or not. Banking is an important concept to be familiar with as it can help you and me with everyday conversation in life and in the business world.

Topic 7

The seventh main real-life topic is money.

    Before macroeconomics, I did not think about money in the financial way it warrants. Money is defined as a standard medium of exchange used in society to facilitate goods and services. Seems pretty self explanatory, right?

    Next, there are two types of money: commodity money and fiat money. Commodity money has intrinsic value, which means it has value by itself physically/is valuable on its own. A prime example of this is precious metal.

    The other type of money is fiat money. This kind does not have much value on its own (low intrinsic value). So, you might wonder as I did, what makes it valuable then? The answer is the government's endorsement of it as a medium of exchange. A prime example of fiat money is cash, and a prime example of the government endorsing it would be money legal tender. 

    Furthermore, it is necessary for everyone to know the three functions of money: 1) money is a medium of exchange (which facilitates the exchange of goods and services), 2) money serves as a unit of account (use money or monetary units to quote prices and values of things), and 3) money stores value of things (so we are able to carry wealth overtime. Nominal or monetary amount is subject to losing     its real value, also known as its purchasing power.)

    I find it very important for me, personally, to understand these concepts as I am graduating college in one year and will be on my own financially in no time. I do not think it has hurt me to learn the technical values and meanings of everything related to money, how to measure quantity of money, the modern banking system, and monetary policy all just this semester, but I am definitely happy I now have knowledge of it moving forward. 

Topic 6

The sixth main real-life topic is stocks and bonds.

    

    Before I took macroeconomics, the topic of stocks and bonds was one that I always thought about and found very interesting. After taking the course, I am very clear on the two, what they have to offer, and how they differ from one another. The two are examples of financial instruments and ways to invest personally or for a firm. 

    

    First of all, we have stocks. The people who buy stocks are called shareholders. Stocks have two types of returns: 1) capital gains and 2) dividends loss. Capital gains occur when a shareholder sells a stock at a higher price than they bought their stock. They are making money, hence the word gains. Dividends loss occur when a shareholder sells a stock at a lower price than they bought their stock. They are losing money, hence the word loss. The main caution about stocks are that they are risky - much risker than bonds. 

    The stock in Zoom was booming during the beginning of the outbreak of COVID-19, because everyone had to work from home. Zoom stock then fell when hackers began to access private meetings. 

    Next, we have bonds. With bonds, there are many less uncertainties. Bonds are a promissory note, which means they promise certain amounts to its holders. This functions exactly like an I.O.U. 

    The way this relates to me is because I am interning with a company this summer and I will be focusing on credit research and municipal bonds. Municipal bonds differ from general bonds in that they are issued by a city, town, or state, in an attempt to fund a public project. I love learning about the different types of bonds, as the topic will be very relevant for the work I will be doing when I intern.

Topic 5

The fifth main real-life topic is unemployment.

    This topic is particularly note-worthy to me, because before macroeconomics, I thought the word unemployed was meant for a person who simply did not have a job. In this course, I learned that there are many other factors, such as the factors that decide who is considered to be unemployed, who is considered to be employed, and what makes up the unemployment rate in our economy. While I personally have not been affected by this, as I am a full-time college student and working is not my priority at the moment, it is very important in the world, because it affects every single person whether they choose to believe that or not.

    

    Furthermore, it is affecting our world currently more than it has in recent years with the outbreak of COVID-19. Not all people's employment has been or will be affected by the virus, but before COVID-19, the unemployment rate in the United States was arguably the lowest it had ever been: 3.6%. As of recently, the unemployment rate in the United States rose to 4.4% (as of March 2020.) Below is an image to explain specifically how this number is determined.

Topic 4

The fourth main real-life topic is the comparison between Nominal GDP vs. Real GDP.

    Real GDP is an attempt to capture aggregate output in which goods and services are valued at prices from a base year. Nominal GDP measures using only current goods and real GDP measures using the base year and current goods. The way this affects everyone's everyday life is major. This is how we tell prices of goods at different times and the cause of them to be this way. Using these numbers and calculations, we are able to solve for values such as price indexes and deflating GDP. This is necessary for individuals and firms to understand. For anyone running a business, this is will be important and always necessary to understand.

Topic 3

The third main real-life topic is the introduction of GDP.

    Once GDP was introduced to us in class, it remained an extremely prevalent topic throughout the course. Gross domestic product is the sum of the value of final goods and services produced and exchanged through legal and organized markets within a country and over a period of time. Furthermore, GDP is composed of total production and total income. 

    GDP per capita is a measure of the average income per person within a period in a country. GDP per capita is different from GDP. This is when some of the topics specific to macroeconomics (vs. microeconomics) were brought to my attention, and I realized I would be learning the "behind the scenes" about everything that makes our country work, our economy work, and how everything relates to one another causing macroeconomics to be the "big picture" economics. 

    We can all thank one economic phenomenon that has had a positive impact on our lives over a long period of time: Long-run Economic Growth. We can thank the improvements in labor productivity, which itself is due to improvements in technology, human capital, and capital.

    The part of this topic to note is how this relates to business cycles. Below is an image of one full business cycle.