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    Helpful Acronyms

    May 30 • Developing Economies, Economic Humor, Government, International Trade and Finance, Macroeconomic Measurement, Money and Monetary Policy • 461 Views

    Reading about the potential contagion of Greece’s debt problems, I discovered STUPID in Schott’s Vocab, a NY Times blog about words and phrases. Schott quoted Reuters Breakingviews, “The new acronym on trading floors for possible dominoes if Greece should fall is STUPID (Spain, Turkey, UK, Portugal, Italy, Dubai).

    A second acronym returns us to the Goldman Sachs economist who coined, BRICs (Brazil, Russia, India, China) as the preeminent emerging economies. Now though, he says we should remember MIST (Mexico, Indonesia, South Korea, Turkey). According to the Guardian, MIST countries share, “a large population and market, a big economy at about 1% of global GDP each, and all are members of the G20.”

    Finally, NY Times financial columnist Floyd Norris takes us to CIVETS and JUUGs. A fund for investing in Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa, CIVETS has fared better than a JUGG (Japan, U.S. U.K., Germany) basket of securities.

    This NY Times article and this column from Dave Barry (“Decaf Poopacino”) provide a funny way to learn about the real civet.

    The Economic Lesson

    A handy acronym for remembering different recovery trajectories is LUV. Experienced by struggling economies (Spain and Portugal) an “L” shaped recovery is problematic. The “U” is more auspicious (U.S) and the “V,” the best (BRICs).

    An Economic Question: Which current stats confirm “L,” “U,” and “V” recoveries?

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    Road Building Results

    May 29 • Behavioral Economics, Demand, Supply, and Markets, Environment, Households, International Trade and Finance, Macroeconomic Measurement, Regulation, Thinking Economically • 384 Views

    If extra road mileage is built, would you predict more or less traffic?

    The WSJ tells us that more roads led to additional driving from local residents, commercial traffic and people moving to the area. Public transportation did not influence driving decisions. Roads did. 10% more road mileage meant 10% more driving.

    The Economic Lesson

    Here is where economics enters the picture. This is all about cost. If we want people to do less of something, their cost needs to increase. With roads, the problem was traffic congestion. The solution, more roads, did not work because it did not increase cost. It made driving more attractive. As a result, the authors of this study conclude that the answer is congestion pricing. 

    Similarly, looking at auto emissions and housing, again, cost makes the difference. For emissions, higher gas prices would reduce emissions. For housing, lower prices will increase sales. And yet, hasn’t public policy been the opposite?

    An Economic Question: For auto emissions, assume your goal is diminished gasoline usage. For housing, your goal is more home purchases. Describe what will happen to demand and supply if cost is used to achieve the desired objective.

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    Job Matters

    May 28 • Businesses, Demand, Supply, and Markets, Gender Issues, Households, Labor, Macroeconomic Measurement, Thinking Economically • 386 Views

    Where do we work and how much do we earn?

    In the entire U.S., there are 2830 mathematicians, 3220 historians, and 225,450 fitness trainers and aerobic instructors. Employing 7.6 million, the largest occupational group is salespeople and cashiers. Here, you can see a Bureau of Labor Statistics (BLS) list of how many of us do what.

    You can also check out where people earn more. On this map illustrating BLS statistics, people in the red labeled areas earn less while the green areas earn more. Red clusters extend from Florida, up to Virginia and then westward to Texas, Oklahoma, and Missouri. Green concentrations are located along the West Coast and Middle Atlantic states.

    Finally, which job groups earn the least and the most? The WSJ tells us that “20% of the work force…[included] the worst paying positions.” With salespeople and cashiers among the lowest paid, predictably, physicians and lawyers are close to the top.  Also, though, there are some surprises.

    The Economic Lesson

    Numbering close to 150 million people, the U.S. labor force includes people who are:

    • 16 years old or older
    • employed
    • unemployed and looking for a paying job

    An Economic Question: As a presidential candidate, which job facts would you believe are most important? Suggest economic policy proposals that relate to the job facts you cite.


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    Apple vs. Amazon in the Fight Over Gaga

    May 27 • Businesses, Demand, Supply, and Markets, Households, Innovation, Thinking Economically • 434 Views

    From a guest blogger, Frances Bird, AP econ student:

    Lady Gaga, America’s current pop queen sensation, is being used to boost Amazon sales, if not permanently, then temporarily. Amazon is using Lady Gaga’s recent album, Born This Way, to compete with Apple Inc.’s iTunes in the digital music industry. While iTunes is selling the album for $11.99 and each song for $1.29, Amazon is selling the album for $6.99, $2 below wholesale prices!

    Amazon is using amazing discounts to woo customers while Apple sits back and attracts consumers. Amazon can barely make a dent in the sale of music on iTunes because Apple products are the best in the business. Forget about price competition. Apple Inc. doesn’t need to lower prices to attract consumers!

    On another note, Lady Gaga cannot be forgotten when talking about economics and Born This Way. Lady Gaga is a marketing genius because she is unique and she is real. Gaga has transformed the music industry, tearing up the standard of what famous people are supposed to wear and how they are supposed to look. Each stunt Gaga pulls is unique and unconditional, which makes for a truly shocking and awesome performance. Lady Gaga fights for a cause and she fights hard, so everyone knows what she truly believes.

    Maybe Gaga taught Apple a lesson on how to fight for what you want!

    The Economic Lesson

    With Amazon’s fight to be in the running, what market is the music selling industry a part of?

    An Economic Question: When trying to pursue something difficult, think of the strategies you could use economically to end up on top. After all, Lady Gaga did not become famous because of her musical talent.


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    Barbecue Inflation (A Hot Topic?)

    May 26 • Businesses, Demand, Supply, and Markets, Economic Debates, Macroeconomic Measurement • 508 Views

    Shopping for your Memorial Day barbecue, you will pay close to 29% more than a year ago. According to the New York Post, not only is a gallon of gas up 44% in the NY area, but also, lettuce will cost you 28% more and tomatoes, 86%. In addition, the New York Post shopping list included hamburger meat, hot dogs, potato salad, supermarket ice cream and coffee.

    Last March, NY Federal Reserve Bank president William Dudley tried, with little success, to convince people to focus on an increasingly healthy economy in which prices were not rising. “Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful.” In response, one person in the audience said, “When was the last time, sir, that you went grocery shopping?”

    The Economic Lesson

    Still though, the Bureau of Labor Statistics (BLS) reports an annual inflation rate of 3.2% and an annual “core rate” of 1.3%.

    How can we have such a discrepancy between respected stats and everyday reality? The key is the philosophy behind the yardstick we use to measure price increases, the Consumer Price Index (CPI). All agree that the CPI reflects the price of a market basket of goods and services. However, what should be in the basket?

    As the source of the “all items” 3.2% inflation rate, the entire CPI market basket includes many goods and services beyond food and energy. Meanwhile, the 1.3% inflation rate is called the “core rate” because it excludes food and energy prices.

    You might wonder why many economists respect the core rate. 1) They say that price fluctuations for food and energy are volatile; 2) Food prices are too dependent on such temporary circumstances as weather; 3) Compared to other goods and services, food prices play a lesser role in the economy; 3) Changes in food prices cannot be moderated by monetary policy.

    An Economic Question: Explain why you believe the “overall rate” or the “core rate” is more valid for deciding whether inflation is a problem?


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