The document discusses notes about missing assignments and up-to-date grades. It then covers comparative advantage between Switzerland and the United States in producing chocolate and wheat. The rest of the document outlines topics around fiscal policy, monetary policy, the Federal Reserve system, and their role in stimulating or restricting economic growth.

1. A couple notes
• Missing assignments!
• Last day to turn those in for any credit
is the day of the test.
• Up until then I will give you half-credit
for anything you are missing.
• Your grades online are up-to date
(excluding what you turned in today).

2. A country has a
Switzerland United States
comparative
advantage if it has a
lower opportunity cost
Chocolate 500 700
in producing
Wheat 50 900
something.
Who has the absolute advantage in making chocolate?
Who has the absolute advantage in growing wheat?
Who has the comparative advantage in producing chocolate?
Who has the comparative advantage in producing wheat?
United States Switzerland
What is the opportunity cost of What is the opportunity cost of
producing one unit of chocolate? producing one unit of chocolate?
What is the opportunity cost of What is the opportunity cost of
producing one unit of wheat? producing one unit of wheat?

3. World Trade Organization (WTO)

4. North American Free Trade
Agreement
• Canada, United States, & Mexico
• Reduces tariffs and other barriers of trade
between these countries.
• Controversial
• Why?

5. Money and The Federal
Reserve System
What it is, what it does,
and why you should care.

6. Objective for today
• Understand the different ways that the
government tries to stimulate or constrict
the economy

7. Vocab. To Know: GDP & Interest
• Gross Domestic Product- the total market
value of all final goods and services the
economy produces in a single year.
• The primary way the health of an
economy is measured
• Interest- payment for using someone
else’s money.
• The “price” of a loan

9. Fiscal policy
• The use of the federal government’s power
to tax and spend to regulate economic
activity.
• Lower taxes
• Increase government spending
• Both
• Ex: FDR’s the New Deal

10. Criticisms of fiscal policy
• Why do we pay taxes? What happens to
government revenues if taxes are
reduced? What happens to the national
debt?
• To offset a tax reduction, the government
would have to borrow money --> could
“crowd out” private investors
• Printing more money leads to inflation
• Politically unfeasible

11. The Fed and the money supply
• The central bank of the United States
• In charge of creating money
• Loans money to other banks
• “Fractional reserve” banking
• Only have to keep small % of deposits
• The rest can be loaned out

12. Monetary policy
• The use of the Federal Reserve’s power to
control the supply of money and credit to
increase economic activity as a whole,
particularly to control inflation and
stimulate economic growth.
• Adjust the discount rate
• Adjust reserve ratios

13. If nothing else, remember
this…
• The Federal Reserve is the central bank of
the United States.
• It tries to regulate the economy to keep it
growing steadily (not too fast, though)
• It can print money, adjust interest rates,
and adjust how much money banks have
to keep in reserve.