Economics 1305 www'msu'edumilewsk6

1
Economics 1/3/05 www.msu.edu/milewsk6

• OBJECTIVE Begin examine of international trade.
• I. Journal 54 pt.A
• -Read Profiles in Economics p.471
• -Answer questions 1 p.471
• II. Journal 54 pt.B
• -begin The Commanding Heights
• III. Homework Due 1/7/05
• 1.) Read Chapter 17 section 1 p.466-470
• -Answer questions (3-6) p.470
• 2.) Read Chapter 17 section 2 p.472-479
• -Answer questions (3-6) p.479
• 3.) Progress Report (printed tomorrow)

2
The weeks ahead

• Wednesday 1/12/05 Last Journal Collection
• Thursday 1/13/05 - Chapter 17 Test
• Friday 1/14/04 Final Exam Review
• Monday 1/17/04 Final Exam Review
• Tuesday 1/18/04 Finals (1,2,3)
• Wednesday 1/19/04 Finals (4,5,6)
• Thursday 1/20/04 No School
• Friday 1/21/04 No School

3
The Commanding Heights episode 1

• -Answer the following questions while viewing
• 1.) What was the old order how did it fall?
• 2.) What is Communism on the Heights?
• 3.) What was the capitalist collapse?
• 4.) What occurred during the global depression?

4
Economics 1/4/05 www.msu.edu/milewsk6

• OBJECTIVE Examine balance of payments.
• I. Journal 55 pt.A
• -Read Profiles in Economics p.500
• -Answer questions 1 p.500 then turn to p.493
• II. Return and Review of Chapter 12 Test
• III. Journal 55 pt.B
• -notes on Marx balance of payments
• III. Homework Due 1/7/05
• 1.) Read Chapter 17 section 1 p.466-470
• -Answer questions (3-6) p.470
• 2.) Read Chapter 17 section 2 p.472-479
• -Answer questions (3-6) p.479
• 3.) Progress Report (printed today)

5
Karl Marx

• In the mid 1800s German born economic historian
  Karl Marx put together a theory called Communism.
• His theory was based on the idea that the story
  of history is a struggle between the haves and
  the have nots.
• The haves exploited the have nots and captured
  the surplus.
• He predicted that the have nots would over throw
  the haves in a violent and bloody revolution
  during the final days of capitalism.

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Marxs Epics

• Primitive Communism
• -no surplus
• Slavery
• -haves slave owners/have nots slaves
• Surplus
• Feudalism
• -haves lords/ have nots peasants
• Surplus
• Capitalism
• -haves bourgeoisie/ have nots proletariat
• Surplus
• Communism
• -everyone shares the surplus

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Balance of Payments

• The sum of all transactions which take place
  between a nations residents and the residents of
  all foreign nations.
• The Formula for BOP
• Current Account
• Capital Account
• Official Reserves Account
• Balance of Payments
• If BOP is positive, trade surplus exists
• If BOP is negative, trade deficit exists

8
Economics 1/5/05 www.msu.edu/milewsk6

• OBJECTIVE Continue examination balance of
  payments.
• I. Journal 56 pt.A
• -Read Profiles in Economics p.266
• -Answer questions 1 p.266 then turn to p.483
• II. Journal 56 pt.B
• -finish notes on the balance of payments
• III. Homework Due 1/7/05
• 1.) Read Chapter 17 section 1 p.466-470
• -Answer questions (3-6) p.470
• 2.) Read Chapter 17 section 2 p.472-479
• -Answer questions (3-6) p.479
• 3.) Progress Report (printed today)

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Current Account

• The section of BOP that records a nations exports
  and imports of goods and services, its net
  investment income, and its net transfers.
• Imports are recorded as a negative
• Exports are recorded as a positive

10
Capital Account

• The section of BOP that records a nations
  purchase of foreign assets abroad and the
  purchase of domestic assets by foreign nations.
• Capital inflows are recorded as a positive
• Capital outflows are recorded as a negative

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Capital Account in a nut shell

• When we buy foreign companies, its an outflow of
  capital.
• When someone outside of the U.S. buys an American
  company its an inflow of capital.

12
Official Reserves

• Foreign currencies owned by the central bank of a
  nation.
• The foreign currency a central bank holds effects
  the value of that nations currency.
• For example If the Central Bank of Canada held
  3 Billion U.S. Dollars on reserve, the value of
  the Canadian Dollar would be effected when the
  U.S. Dollar changes in value

13
Flexible Exchange Rates
14

• http//atlas.gc.ca/site/english/maps/reference/nat
  ional/can_political_e/referencemap_image_view

15
Tim Horton
http//www.timhortons.com/en/menu/menu_donuts.html
http//collections.ic.gc.ca/wentworth/timhorto.htm
http//www.insidejoke.tv/200210/donutguy.asp
16
Economics 1/6/05 www.msu.edu/milewsk6

• NO SCHOOL Snow Day ?

17
Economics 1/7/05 www.msu.edu/milewsk6

• OBJECTIVE Examine why nations trade.
• I. Journal 57 pt.A
• -Read The Global Economy p.476
• -Answer questions (1-3) p.476 then turn to
  p.23
• II. Journal 57 pt.B
• -notes on absolute comparative advantage
• III. Journal 57 pt.C
• -questions on Commanding Heights Day2

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Why trade?

• Specialization assignment of tasks so that each
  worker performs fewer tasks more frequently
• i.e. Detroit specializes in cars, Florida in
  oranges, Texas in cattle
• Exports what a nation specializes in.
• Individuals engage in trade because they believe
  what they gain is equivalent in value to what
  they give up.

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Advantage

• Absolute advantage when one nation can out
  produce another nation making the same product
• Comparative advantage the ability to produce a
  product relatively more efficiently, or at a
  lower opportunity cost
• Opportunity cost cost of the next best
  alternative use of money, time, or resources when
  one choice is made over another

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Alpha Beta

• Country A
• PPF
• -40 lbs of coffee
• -8 lbs of cashew nuts
• Opportunity cost
• -5 coffee for 1 cashew

• Country B
• PPF-
• -6 lbs coffee
• -6 lbs cashew nuts
• Opportunity cost
• -1 coffee for 1 cashew

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Before After Trade

• Before Trade
• Alpha produced
• -20 lbs coffee
• -4 lbs cashews
• Beta produced
• -5 lbs coffee
• -1 lbs f cashews
• Totals
• -25 lbs coffee
• -5 lbs cashews

• After Trade
• Alpha specializes in coffee
• -40 lbs coffee
• -0 lbs cashews
• Beta specials in cashews
• -0 lbs coffee
• -6 lbs cashews
• Totals
• -40 lbs coffee
• -6 lbs cashews

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The Gains of TradeCh17 sec1 p. 469
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Questions on the Commanding Heights Day 2

• 1.)How did Hyeck feel about central planning?
• 2.)Why did Churchill lose re-election after the
  war?
• 3.)How did the Soviet Union emerge from the war?
• 4.)What was the form of currency in post WWII
  Germany under the wage and price controls?
• 5.)What happened in Germany after the allied
  price controls were lifted?
• 6.)What became the Gospel in the developing
  world?