Chapter 35: The Short-Run Trade-Off Between Inflation and Unemployment

This chapter discusses the temporary tradeoff between inflation and unemployment that arises from unanticipated inflation. A rising rate of inflation may reduce unemployment, and the effects may last for something like two to five years. The negative relationship between inflation and unemployment is shown on the Philips curve. To get to a point on the Philips curve with higher inflation and lower unemployment, policymakers expand aggregate demand. The opposite is true for a point on the Philips curve with lower inflation and higher unemployment (contracting aggregate demand).
The relationship between inflation and unemployment holds true only in the short run because in the long run, expected inflation adjusts to changes in actual inflation; thus shifting the short-run Philips curve. In the long run, this curve is vertical at the natural rate of unemployment.
Adverse supply shock->policymakers must accept a higher rate of inflation for any given rate of unemployment or a higher rate of unemployment for any given rate of inflation.

Chapter 34: The Influence of Monetary and Fiscal Policy on Aggregate Demand

This chapter focuses on the government tools that influence the aggregate-demand curve in the short-run; that is monetary policy and fiscal policy. We first examine the short-run market through Keyne's theory of liquidity preference that states the interest rate adjusts to bring money supply and money demand into balance. Both nominal and real interest rates are affected and move in the same direction. (Real+nominal=short-run, nominal=long-run).  Money supply in this market is controlled through the Fed Reserve and so is fixed/ vertical. Money demand is determined in large by the interest rate, where an increased interest rate raises the cost of holding money, and as a result, reduces the quantity of money demanded. The market is constantly trying to maintain an equilibrium interest rate.
If the interest rate is above the equilibrium level, the quantity of money that people want to hold is less than the quantity supplied. Those people buy interest-bearing assets and banks/loaners respond with lower interest rates. The reverse of this is true for when interest rates are below the equilibrium level.
There is a negative relationship between price level and quantity demanded. When price level increases, the quantity of money demanded increases at any given interest rate, thus shifting the MD curve to the right. This, however, only translates to a leftward movement along the aggregate-demand curve because it is only for a specific price level. This reduces quantity of output.

Chapter 33: Aggregate Demand and Aggregate Supply

Unlike previous chapters, chapter 33 focuses on short run variables and the interaction of real and nominal variables (we ignore money neutrality and classical dichotomy). It is important to know that economic fluctuations are irregular and unpredictable, most macroeconomic quantities fluctuate together, and as output falls, unemployment rises. The model of aggregate demand and supply has two variables: the output of goods and services (real GDP) and the average level of prices (measured by the CPI or GDP deflator).
The aggregate-demand curve is a curve that shows the quantity of goods and services that households, firms, the government, and customers want to buy at each price level. The aggregate supply-curve is a curve that shows the quantity of goods and services that firms choose to produce and sell at each price level. Price level is on the vertical axis, while quantity of output is on the horizontal axis. This model may look like the simple supply and demand model in Chapter 4, but it shows all goods in services in all markets in the entire economy; there are no substitutions.

Chapter 32: A Macroeconomic Theory of the Open Economy

This chapter discusses the two markets of an open economy: the market for loanable funds and the market for foreign-currency. In the market for loanable funds, demand is I+NCO, and supply is S (savings), while in the market for foreign-currency exchange, demand is net exports and supply is held constant from NCO. The link between the two is NCO, and the real exchange rate balances both their supply and demand.
In the market for loanable funds, when NCO>0, there is net capital outflow and this adds to the demand for domestically generated loanable funds. When NCO<0, there is net capital inflow, and capital resources coming from abroad reduce the demand for domestically generated funds. The quantity or loanable funds supplied and demanded depends on the real interest rate. An increase in the real interest rate discourages Americans from buying foreign assets and encourages foreigners to buy U.S. assets therefore reducing net capital outflow.
In the market for foreign-currency exchange, it is important to remember NCO=NX. If NX>0, NCO>O (buying foreign assets w/ bank) and if NX< 0, NCO <0 (spending must be financed by selling American assets abroad). When the U.S. real exchange rate appreciates, U.S. goods become more expensive relative to foreign goods, making U.S. goods less attractive to consumers both at home and abroad.

Chapter 31: Open-Economy Macroeconomics: Basic Concepts

We are introduced with the concept of an open economy, one that interacts freely with other economies around the world. These interactions occur in two forms: the buying and selling of goods and services in world  product markets and the buying and selling of capital assets such as stocks and bonds in world financial markets. When there is a trade deficit, exports are less than imports, net exports are negative, saving is less than investment, and net capital outflow is negative; the reverse is true of trade surpluses; balanced trade lies in the middle.
There were several identities in this chapter. The new ones were net exports (also called trade balance) and net capital outflow (also called net foreign investment). Net exports refer to the value of a nation's exports minus the value of its imports. If net exports is positive, the country is said to run a trade surplus, or an excess of exports over imports. If NX<0, it is a trade deficit, and if NX=0, it is said to have balanced trade. Net capital outflow is the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners. If NCO>0, domestic residents are buying more foreign assets than foreigners buying domestic assets. Capital is flowing out of the country. If NCO<0, a country is experiencing a capital inflow.
The idea of saving, investment, and their relationship to the international flows was also expanded. We previously learned Y=C+I+G, and in this chapter, NX was added to the right side of the equation due to the concept of an open market economy. Also, S=I+NCO (saving=domestic investment+net capital outflow).
This chapter was kind of confusing because there is a lot of terminology. However, I feel like it is mostly memory and just needs repetition. I was a little confused about the part with trade deficits induced by a fall in savings or by an investment boom; and the effects of each.

Chapter 30: Money Growth and Inflation

Stockman discusses money growth and inflation. The overall level of prices in an economy adjusts to bring money supply and money demand into balance (where the supply is fixed by the Fed and the demand for money reflects how much wealth people want to hold in liquid form); in other words: the quantity of money available determines the price level.  Stockman then goes on to discuss classical dichotomy.
I thought this chapter was pretty confusing and contained a lot of vocabulary words (inflation,: the increase in the overall level of prices, deflation: the decrease in the overall level of prices, hyperinflation: an extraordinarily high rate of inflation, quantity theory of money: a theory asserting that the quantity of money available determines the price level and the growth rate and the quantity of money available determines the inflation rate, nominal variables-variables measured in monetary value, real variables: variables measured in physical units, classical dichotomy: the theoretical separation of nominal and real variables, monetary neutrality-the proposition that changes in the money supply do not affect real variables). I'm still trying to figure out how they all relate and I would also like to go over the graphs, because they're a lot different that all the other graphs we've previously discussed.

Article Review 7: "Simple Janet"

David Stockman criticizes the capacity of the Fed, aiming most of his criticism at Janet Yellen. He goes so far as saying that the Fed can do nothing to help the catastrophe, but that instead, the catastrophe (our economy) was caused by the Fed. So far, the Fed has just been injecting money into the economy and falsifying money market interest rates in an effort to induce businesses and households to borrow + spend more. However, we are at peak debt, and this policy will not work (yet the Fed is so focuses on this policy like a broken flash drive).
There has been negative growth in household debt since the financial crisis, most jobs are "born-again" jobs, and our growing debt has not been used for productive assets. NIRP is a colossal fail in Europe and is not an exception in America. (I looked up NIRP and it is an unconventional monetary policy whereby nominal target interest rates are set with a negative value, below the theoretical lower bound of zero percent. Instead of receiving money on deposits, depositors must pay regularly to keep their money with the back. This creates at incentive to invest, lend, and spend). However, Stockman greatly urges that this is not only an "unconventional" policy but also a disastrous one.