Chapter 31

Chapter 31 is describing the difference between an open and closed economy. More importantly, it clearly demonstrates the affect net exports can cause and what it means to have a trade surplus or deficit. In addition, we revisit the equation in the previous chapters that discussed how savings is equal to net exports plus investment. Also, the net capital outflow equals the net exports. By looking at other economies, we can compare the dollar to other currencies in order to see whether the dollar value appreciated or depreciated.

Chapter 30: Money Growth and Inflation

Chapter 30 discusses the money and prices in the economy in the long run. Specifically, it talks about inflation and the difference between nominal and real variables. Overall, the level of prices adjusts to the money supply and demand. However, when inflation happens, the central bank is supplying too much money, causing the price level to rise. In addition, when an inflation tax is presented, this can cause a hyperinflation. One application of the principle of monetary neutrality is the Fisher effect. According to the Fisher effect, when the inflation rate rises, the nominal interest rate rises by the same amount so that the real interest rate remains the same.

Chapter 29: The Monetary System

Chapter 29 is all about describing the monetary system. The chapter talks about the Federal Reserve Bank and how they are the ones in charge of "controlling" the money supply in the nation. In addition, the chapter includes the difference between money and wealth. It also describes how money has three characteristics: a medium of exchange, a unit of account, and a store of value.