No Bull Economics Lessons

Macroeconomics & Microeconomics Concepts You Must Know

Essential Questions

The ulitimate Economics [Macroeconomics and Microeconomics] resource featuring essential questions and explanations. Video lectures, graphs, concepts, and diagrams are included. Click on any topic on the right to get started or search any topic below. Awesome study aid for students taking economics courses. Great resource for teachers to use in their classrooms.

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What does elasticity measure?

Posted on February 11, 2016 at 7:50 AM Comments comments (0)

In this No Bull Economics lesson, we discuss how to measure the responsiveness, or elasticity, of anything. This video refers to the price elasticity of demand, price elasticity of supply, income elasticity of demand, cross price elasticity of demand, wage elasticity of demand, wage elasticity of supply, interest rate elasticity of savings, and interest rate elasticity of borrowing. After looking at these basic elasticity formulas...

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What is a budget constraint graph?

Posted on February 2, 2016 at 9:45 AM Comments comments (0)

The No Bull Economics video below introduces the concept of a budget line or budget constraint. In this example, an individual is deciding how many swimsuits and pairs of flip flops to purchase before beach season. A budget line is comprised of the different combinations of these goods that the consumer can afford. Te consumer can afford any combination on the line and inside the line, but cannot afford any combination outside the line. The main ideas behind an in...

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Why study economic theories and models?

Posted on February 1, 2016 at 11:45 AM Comments comments (0)

When you learn economics for the first time, you are really learning a new way of thinking about the world. Economic theories and models can help us understand peoples' behaviors and how to approach and solve all kinds of problems. This No Bull Review video goes over the importance of marginal thinking, opportunity costs, incentives, and why developing economic theories and models are so important.

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How are AP Macroeconomics and AP Microeconomics different?

Posted on May 22, 2015 at 12:45 AM Comments comments (0)

The College Board (whether you love it or hate it) offers two Advanced Placement exams every May: one exam for Macroeconomics and one exam for Microeconomics. Macroeconomics looks at the economy as a whole with an emphasis on macroeconomic policies by the government and international economic matters. Microeconomics looks at individual markets and firms with more precision than the Macroeconomics course in the AP program.

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How do you show the effects of a decrease in aggregate income using the foreign exchange market?

Posted on January 17, 2015 at 11:25 AM Comments comments (0)

Suppose one economy is in recession while another country’s economy is strong. The country in recession won’t be able to import as many goods since income is low. Therefore, it will supply less currency to the foreign exchange market. When this happens, the value of currency will appreciate.


AP Macroeconomics Unit 6 International Trade

How do exchange rates work?

Posted on January 17, 2015 at 11:20 AM Comments comments (0)

An exchange rate is determined by supply and demand in the foreign exchange market. It is how much of one country’s currency it takes to buy one unit of another country’s currency.


For example, it might cost 0.73 euro to buy $1 US this month. If it costs 0.5 euro to buy $1 US next month, the euro has appreciated in value because it takes fewer euros to buy $1 US. This means that the dollar has depreciated against the euro.


With...

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What are some barriers to international trade?

Posted on January 17, 2015 at 11:20 AM Comments comments (0)

In the long run, the gains from international trade are greater than the losses. In the short run, trade can hurt domestic producers and cause domestic unemployment, which can lead to the implementation of trade barriers by policy makers.


One type of trade barrier is a tariff; a protectionist tool that taxes imports. This raises the costs of foreign goods to keep domestic industries alive. However, higher prices hurt consumers.


Other ...

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How does a trade deficit affect a nation's economy in the short run?

Posted on January 17, 2015 at 11:15 AM Comments comments (0)

A trade deficit occurs when a nation’s imports are greater than its exports. Net exports are negative and the current account is showing a deficit. When a trade deficit increases in the short run, aggregate demand shifts to the left. The price level decreases, real GDP falls, and unemployment rises.


If a nation’s exports are greater than its imports, it has a trade surplus or current account surplus. When net exports increase, aggreg...

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What is the difference between a current account transaction and a capital account transaction?

Posted on January 17, 2015 at 11:10 AM Comments comments (0)

The balance of payments system keeps record of all foreign transactions. There are two main accounts in the balance of payments system, the current account and capital account.


The current account consists of imports, exports, and foreign transfer payments.


The capital account (or financial account) consists of real assets and financial assets. A real asset is property or a factory. A financial asset is a stock or...

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What is a balance sheet?

Posted on May 24, 2014 at 9:35 AM Comments comments (0)

A balance sheet (or t-account) keeps record of a commercial bank's assets and liabilities after each banking transaction.


An example of a liabilitiy is a demand deposit (checkable deposit) because the bank must pay its depositors on demand.  An example of an asset is a loan issued by the bank because the debtor must repay the loan amount to the bank.


This No Bull Review video explains how to record a bank's transactions using a bal...

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What happens when the Fed buys or sells bonds?

Posted on May 24, 2014 at 9:25 AM Comments comments (0)

When the Fed buys treasury bonds, the money supply increases and interest rates fall.  This increases investments and consumption spending. Aggregate demand increases, price level increases, and real GDP increases, and unemployment falls. 


When the Fed sells government bonds, the money supply decreases and interest rates rise.  Investment and consumption decreases, aggregate demand decreases, price level falls, real GDP falls, and unemployment ri...

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How do you graph a foreign exchange market?

Posted on April 18, 2014 at 11:00 AM Comments comments (0)

To graph a foreign exchange market, you need to two different currencies to compare. For example, the market for US dollars needs to show how much of a foreign currency is needed to buy 1 US dollar.


In the market for US dollars, the quantity of dollars goes on the x-axis. On the y-axis, you put the foreign currency price of the US dollar.


In the No Bull Review graph below, we see the market for US dollars and how many euros it takes to buy a US dollar. This...

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What factors will depreciate the value of currency?

Posted on April 18, 2014 at 10:55 AM Comments comments (0)

The international value of currency will depreciate (decrease in value relative to another currency) due to the following factors:

 

1. Interest rates decrease - Foreigners will demand fewer bonds when interest rates fall (because foreigners will make less money off our interest-bearing assets).

 

2. Tastes and preferences for goods decrease - If foreigners demand fewer products produced over here, then the currency will depreciate.


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What factors will appreciate the value of currency?

Posted on April 18, 2014 at 10:45 AM Comments comments (0)

The international value of currency will appreciate (increase in value) due to the following factors:


1. Interest rates increase - Foreigners will demand more bonds when interest rates rise (because foreigners will make more money). There will be more demand for currency so the currency will appreciate.


2. Tastes and preferences for goods increase - If foreigners demand products produced over here, then there will be more demand for currency a...

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How do you graph a contractionary monetary policy?

Posted on April 18, 2014 at 10:40 AM Comments comments (0)

When graphing a contractionary monetary policy (AKA tight monetary policy), it is a good idea to draw a money market graph and an AD/AS graph. A tight monetary policy makes most sense during periods of high inflation. The Fed will sell bonds on the open market (or increase discount rate or increase reserve ratio)

 

In the money market, you want to show a leftward shift of the vertical money supply curve. This will raise interest rates and decrease investment and consum...

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How do you graph an expansionary monetary policy?

Posted on April 18, 2014 at 10:35 AM Comments comments (0)

When graphing an expansionary monetary policy (AKA easy monetary policy), it is a good idea to draw a money market graph and an AD/AS graph. An expansionary monetary policy makes most sense during a recession. The Fed will buy bonds on the open market (or decrease discount rate or decrease reserve ratio)


In the money market, you want to show a rightward shift of the vertical money supply curve. This will reduce interest rates and increase investment and consumer spend...

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What are the tools of monetary policy?

Posted on April 18, 2014 at 10:25 AM Comments comments (0)

The Federal Reserve (central bank) has several tools of monetary policy that influences money supply and interest rates. Here are the major monetary policy tools:


1. Open Market Operations: When the Fed buys and sells government bonds (or securities) to change the money supply and interest rates. The Fed targets the federal funds interest rate (bank-to-bank interest rate for short-term loans) through open market operations. If the Fed wants to increase money supply an...

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How do you calculate marginal revenue product?

Posted on April 18, 2014 at 10:20 AM Comments comments (0)

Marginal revenue product (MRP) is the change in total revenue divided by the change in quantity of inputs. You can also calculate the MRP by multiplying marginal product (AKA marginal physical product) by the marginal revenue.


MRP = Change in TR / Change in Inputs

or

MRP = MP x MR


AP Microeconomics Unit 3 Resource Markets

How do you calculate the profit-maximizing combination of economic resources?

Posted on April 18, 2014 at 10:15 AM Comments comments (0)

When a firm employs two types of resources, we can determine the profit-maximizing quantity of each input by using the following equation:

 

Marginal Revenue Product of Labor / Price of Labor = Marginal Revenue Product of Capital / Price of Capital = 1

 

The ratios must be equal to one. If you need the MRP / P to decrease, then hire more units of that resource. This is because of the law of diminishing marginal returns (as inputs hired increases, mar...

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How do you calculate the utility-maximizing combination of goods for a consumer?

Posted on April 18, 2014 at 10:10 AM Comments comments (0)

When a buyer purchases two types of goods, we can determine the utility-maximizing quantities of each good using the following equation:

 

Marginal Utility of X / Price of X = Marginal Utility of Y / Price of Y

  

The ratios must equal one another. If you need the MU / P to decrease, then buy more units of that good. This is because of the law of diminishing marginal utility (as you buy additional units, marginal utility decreases).

 ...

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