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.

Chapter 29: The Monetary System

Mankiw discusses money, which is fundamental in creating an allocatively efficient economy. The three purposes of money are the following: provide a medium of exchange (an item that buyers give to sellers when they want to purchase goods + services), a unit of account (the yardstick people use to post prices and record debts), and a store of value (an item that people can use to transfer purchasing power from the present to the future); stocks and bonds are other examples of stores of value. There are two kinds of money, commodity and fiat. Commodity money refers to money that has intrinsic value even if not decreed by the government, while fiat money is money w/o intrinsic value. Mankiw then told an example in Iraq where "swiss dinars" were used over government decreed "Saddam dinars" (fiat money) perhaps due to social convention and expectations.
The difference between wealth and money is often not differentiated in modern terms, so it is important to note that wealth refers to all stores of value (money+nonmonetary assets). I thought this chapter was pretty straightforward; there was just a lot of terminology. The fact that peacock feathers and cigarettes was interesting and strange, and it made me wonder about our current economy (how I never thought it was weird to accept and pay for goods and services in paper; and that Mankiw saw this was 'rare', but I wish he would expand on this. I'm pretty sure other economies run the same way, or does he mean rare historically?). It was also interesting to know that the average American should have about 3,272 in their pockets which is sadly, for me, not the case. The plausible explanations are: much of currency is held abroad and much of the currency is held by drug dealers, tax evaders, and other criminals (and thus not sitting in the bank).