Day 50 How to boost the outcome on a specific matter

How to boost the outcome on a specific matter

We are dealing with many challenges in our life, so it has been a complicated issue about how do we accomplish our goal effectively. In my opinion, we will get the best outcome if we are applying consistency and hard work with the right method to approach the goal, meanwhile being attentive to the details.

As I emphasized in my previous essays, we must clarify the ultimate goal that we would like to achieve. That goal is the light house on our journey, which indicates the direction for us to put our effort. Therefore, we are able to pool all the resources efficiently on one target. It has to be actual and reachable through our hard-work, hence we should set it as the most favorable output expected. We should ignore outside factors that vary the goal and only concentrate on our personal capacity. This is because the target is what we are aiming to achieve, and willing to sacrifice our vigor to exchange for it. The result depends on us, not others.

We have to apply the right approach to our goal. An ingenious and appropriate method will grant us twice results with half the effort. These methods can be generated from our knowledge, but mostly are based on experiences. Consequently, we should train ourselves through continuously participating in social activities, solving problems in our life, or observing other people’s strategy on their troubles. These will bring us precious experiences, thus we will be able to perform well when facing the similar issues. In addition, we should seek help from our parents, friends and professionals, in order to develop the adequate way to obtain the desired outcome.

Furthermore, we are required to be attentive on the overall progress. While we are implementing the actual procedures, it is crucial for us to actively tracking to progress and consider conscientiously for every detail factor. In contrast to the planing stage, we need to monitor all the elements that may affect the final outcomes during the application stage. For instance, if we are applying for credit transfer in the university, it is our responsibility to provide the relative documents. Thereby, we must arrange the documents into a distinct output format for the benefit of presenting an organized image to the officer. Besides that, we can support evidence that not demanded by the authority, but may help our application. The application is a serious matter to us, but it is only another daily job for the officer. So we must make our own effort, since we cannot expect the officer will. In conclusion, being attentive means that we focus on all detailed factors that might vary the result, and strive to influence them.

At last, what remain is always consistency and endeavor. They are always the keystone to determine outcome.‘The conditions of conquest are always easy. We have but to toil awhile, endure awhile, believe always, and never turn back.’– Lucius Annaeus Seneca, Philosopher. It is genuine, and we must keep that in mind if we want to achieve our goals.

Day 49 Races diversification leads to conflicts

Races diversification leads to conflicts

The Chelie Hebdo shooting and the Sydney hostage siege alerted us that our life is still under threat. Sadly, these bitter we had to swallow were created by ourselves. The national amalgamation brings us the race's diversity, and these diversities cause conflicts. Eventually, hatred was carried out, which intensify the conflict to become retaliatory attacks. It is a complex issue for us to explain the reason behind this friction, but it can be briefly concluded into four factors: cultural,religious, political and economical.

In an industrial country like Australia, there are many immigrates whose amount can even exceed the local people. The different backgrounds make them have various cultures, and sometimes these specific cultures cannot easily be accepted by others. For example, Jewish people are an extremely cohesive community due to their miserable experience in WWII. They follow their conventional tradition strictly and always wear their famous kippah. The Jewish people have rather closed society and keep the cheer and sorrow among themselves. However, it caused the lack of information communicated with outside. When other people realized the disunity from the culture and lifestyle, they will tend to eliminate these differences. It is an impossible task because we cannot change other people’s culture. In addition, the lack of communication prohibits us from developing further understanding of their culture, therefore the conflict appears.

Similar to the cultural conflict, the religious collision is generated in the same pattern, but may lead to more severe troubles. People who live in a same country believe in different god and according to their bible, other sects could be the enemy. In fact, most of the terrorist attack in middle east countries were caused by the doctrine conflicts.Fervent believers may be willing to scarifies their own life for the ‘greater good’, because they think their souls will be protected by their God.

Unlike Australia, some countries’ government may implement policies to protect their local people’s welfare. It is normally because the politicians want to fawn on the local voters. To illustrate, the Chinese immigrates contributed up to 60% of the total tax income in Indonisia back into 1990s. And the Indonisia government repaid these people with forcing them to change Indonisia names and acquiesced in the riots to slaughter them in May 1998s. Even in now days, these Southeast Asia countries tend to allocate the immigrates’ tax payments on the local peoples’ benefits. Hence this political racist generates uneven in the society, which creates the community opposition.



The last source of the clash is via the economic perspective. The world is full of competition, so the local people may argue that immigrates took their resources such as jobs. In my opinion, it is a false statement. It might be true that employers are granted with more options, which increase the competition in the labor market. However, the injection into the work force will also stimulate the total consumption, and therefore, economic growth. As a consequence, more employment opportunities are created, in order to meet the raise demand. Many people who are incompetent to get a job blame their failure on the immigrates, thereby, collision sparks.

It is a human nature for people to contend with each other, since we want to acquire more shares in the scarce resources. Therefore, we could never wipe out the conflict, but by actively communication, we will minimize the chance for it. Plus, we will be able to avoid radical method for vengence.  

Day 48 The iPhone trade-in for Xiaomi

The iPhone trade-in for Xiaomi

Recently, the Chinese cellphone dealer Xiaomi announced a trade-in activity, which people may use their used iPhones exchange with their newest model, the Xiaomi redmi note. This decision might seems unreasonable for many of us, since it seems this trade-in will damage the Xiaomi’s brand image. Because the customers may consider it is an inferior good compare to iPhone. However, it is not the case, in order to understand why this action did not lead to a negative effect. We must probe in the features of the Xiaomi cellphone and its customer group.

The Xiaomi was developed under the environment that the mobile phone market in China was carved up by the huge international manufactures such as Apple, Motorola and Nokia. Instead of enter the market and get crushed by its competitors, Xiaomi applied the starvation marketing strategies to promote the brand. The best products are always those we cannot get our hands on. In the early stage of its marketing process, Xiaomi utilizes the power of the Internet perfectly. It hired plenty Internet hype to publish topics in the most popular forums, these articles created a bubble of demand of this new product. Therefore, these combined fake and actual review or willingness to purchase successfully attract people’s attention. The second marketing strategy Xiaomi applied is the cheap cost of its products. A relatively lower price which is less than the customer’s reservation became another attraction point for their product. Even though the price generated a negative effect on the quality image of the brand, the Internet advertisement created a robust demonstration effect on buyers. Which made the consumer judge the quality of this cellphone free from price-bias, because the community around them were talking about it. At the last stage, the Xiaomi marketing group ingeniously applied the hunger marketing strategy, and that restricted the supply of the product. As a result, the increased demand could not be met up with the limited supply. In addition, the price is remaining unchanged, hence the excess of demand transferred to the huge incentives of customers to choose Xiaomi as their cellphone.

Consequently, the trade-in activity between Xiaomi and iPhone can be considered as a rational decision. The company believes their customers still retain the strong incentive to purchase, thus the trade-in will only attract the new potential users. It is in fact, genuine, the purchaser already took the low price into their judgement of brand quality, but the Internet promotion created the idea that they are the smart customers who are using a good-quality product at a lower price. On the other hand,  people that exchange their old iPhone with the new model of Xiaomi may stick with this brand in the future, because honestly, the technology is not much different. Furthermore, the Xiaomi company could recover costs from recycling the chipset of the iPhone as well. Thereby the trade-in activity becomes a future investment on market share, which incurred minor costs.

In conclusion, this decision will help the Xiaomi expand its market, and it also creates some great advertisement for the product. The media will spread this information as news through the Internet, which has nil cost for the company.

Day 47 About course planning

About course planning

During our study in the university, it is important for us to develop of a proper plan for the course. The university education structure can be complicated and confusing, so we should carefully choose the units taken in every semester. A well scheduled study plan will not only benefit us in our academic progress, but also our future career after graduation. In order to achieve this, we have to establish the schedule base on a fully understanding of the relative information.

First of all, we must comprehend the course structure.It will be provided by the handbook of the specific degree, and we shall find these information on the university’s website. Australian universities are running the credit-assessment education system, so our ultimate goal is to obtain enough credit points to graduate The course handbook will state the minimum points required to complete the degree. In addition, we must dig deeper in the unit structure. Therefore, we can know how much credit each unit weighted. Normally, the unit outline will list several core units that are compulsory for students to take. The total credit assessment is comprised with these core subjects and other elective units. Hence we have to obtain a general idea about what units should we pick through our university life. We will always get sufficient information on the course from the faculty’s website, otherwise we need to inquire the course advisor for further information.

After we acquired adequate knowledge of our course, it is the time for us to determine our personal goals. We should develop the plan that is appropriate to our personal condition or preference. For instance, we may want to graduate early, thereby we must enroll in the summer semester and participate in more units for the limited period. On the other hand, we may prefer to enjoy our uni-life or ease of our financial pressure, so we can adjust the schedule loosely and grant us more leisure time. Moreover, we need to define the major that we will choose to study. This is crucial for the direction of learning, because it will affect our future career. We have to consider our decision carefully base on our personal-interest combine with the actual application in the work. In my opinion, we should enroll in the units that are associated with professional certification. We can cover the study of these certifications during university, and therefore, it makes our application for these memberships much smoother. Furthermore, we have to utilize the advantages of our prior learning, which may grant us some credit before we start. It will benefit us both economically and academically.

At last, it will be the actual process of unit allocation. At this stage, we can draw a pyramid shape graph to represent the relevance of the units. As we know, there are many subjects require prior completion of the fundamental units. Thereby we must indicate the top of the pyramid, which is the subject needs the most pre-units to enroll in. We put these top units at the bottom of our vertical course plan, then add the ‘bricks’ to support them one by one. However, it is important for us to read the unit schedule, due to some of them are only provided in the specific teaching period. We should always talk to our course advisor for the plan. They are very experienced hence they can be extremely helpful for the planning process.

A perfect plan can give us some advantages at the starting point of the university life. However, the endeavor is the key to our success. We may find the initial plan to become inapplicable as we are making progress, so the minor adjustment during our study is required.

Day 46 Technology and study

Technology and study

The modern technology has taken more and more parts in our life, so as our study. The new development of computer software and other magnificent renovation promotes our study efficiently. As a new-generation student, we should be able to access these support proficiently, in order to establish our own advantages. Using these technologies will save us a lot of time along with extra benefits. However, we have to balance the traditional way of study with it. Because the actual output is still majorly based on our hard-work.

The most significant differences between us and students before 1990s are caused by the popularized Internet technology. Our text book will normally include an access code for the on-line material. This on-line learning center provides a great complement of the book and in-school study. Therefore, we can either preview or review the subject through this platform. The large publishing group will support their reader with online quiz and power point present. Which allows us to comprehend the book by studying the emphases in the chapter. Even through we may not find these online materials as useful as our lecturer’s handouts, it still grants us some supplementary explanations to the topic. In addition, the expansion of the Internet makes knowledge available to share online. For example, we may inquire any difficulties we face via the student portal to our lecturer, that is rather convenient due to the row could be too long after class. And we can organize our language better in writing, hence make the question more concise. When we study by ourselves, the Internet breaks the barrier of knowledge spreading, thus we will always find someone who is better than us in the specific area. The Internet eliminates the physical distance between us and the information, thereby make our study much easier. Moreover, the information technology generates a handy portal for us to monitor our study process. The university student portal enables us to manage our unit schedule, fee payment, and other related activities online. Which is also, a cost avoidance benefit, it reduces our time consumption on accessing these information

Furthermore, the education and office software assist our study process as well.Especially on language study, the English learning software such as ‘Speaking-pal’, ‘British Council Grammar’ and ‘Practicing English Grammar’ help non-English background students including myself practice our language. The office software makes the study itself gets rid of the exhausting handwriting and graphing progress. The notes or assignment produced through this software has a much clearer interface, so it is more straight-forward for us to review it. However, the lack of the hand-writing process may lead into the problem of memorizing the knowledge, hence we need to combine these two methods together.

The advancement in technology has truly provided us a lot of benefits on study. But we cannot totally rely on it, because I believe that real wisdom is created by our endeavor, and all the techniques are only the tools to assist us.

Day 45 Social media regulations

Social media regulations

The word ‘media’ is explained in the oxford dictionary as ‘The main means of mass communication (television, radio, and newspapers) regarded collectively’. Therefore, the social media technology on the Internet that enables us to communicate information, ideas or opinions to the public turns us to become a self based media. These platforms allow us to share other people’s knowledge and experience through twitters, blogs and mini-blogs. However, it is nearly impossible for us to verify the genuineness of this information. In 2014, Chinese government applied a new legislation, which complemented the definition of crime of defamation. It states if the libel information was viewed over 5,000 times or reblogged over 500 times, then the original spreader of that information would commit the crime of defamation. In addition,  a boy in US was arrested due to his silly tweet about attacking a nearby prime school. 

Interestingly, there are two exact opposite opinion within the society for these regulations. Many people are very upset, because they see this as a step-back of freedom of speech. They contended that people should have absolutely no restriction on the information. Since the idea of the Internet is based on sharing, people should not be charged for their comments. They also argued that the Internet is the last sanctuary for this freedom, due to the traditional media is controlled by the government. Therefore, only the Internet will provide the truth they deserve to know. They believed these actions taken by the government shows that it is sacred for the internet revealing those ‘ dirty secrets’ . And this opinion is promoted by the wikileaks incident, certainly, people will never know these scandals without the Internet.

On the other hand, there are supporters of the regulation implemented over the social media network. The Internet is a complex place, it combines the most bright and positive ideas with the most coarse and negative opinions. People share their joys and cherishment through their self-media channel. But unfortunately, there are people who misuse the platform to commit fraud or simply vent their anger in the real life. Since the identity is concealed on the Internet, people tend to wreak vengeance on all their unhappiness. The supporter of the regulation claims that the policy creates a potential cost for people acting recklessly and provides unfaithful information, Hence they would consider the consequences for their behavior, which generates incentives for them to choose to provide positive energy to the society.

In my opinion, it is a good thing for the social media have some form of rules. Because too much freedom at nil cost will only bring chaos. However, it does not mean the government can abuse its power over the Internet. Overused regulation is the violation of the right for people to speech freely.

Day 44 Student accommodation

Student accommodation

As a university student, sometimes it is necessary for us to seek accommodation near the school. However, there are countless rent advertisements on the Internet. So how do we find a place to live that is both convenient and economical, while avoiding renting scams. In my opinion, the key is based upon the information collected on the property.

When we are choosing the accommodation, there are several factors that need to be taken into our consideration. Firstly, is the expenditure for renting. The cost for us to rent can be divided into three parts: the rental charge, the security bond and other relative household expenditures. Ordinally, the weekly rent should be around 150-300 AUD. This amount varies to depend on we are renting along or sharing with the others. In addition, the lessor will ask for a security bond in case the tenants breach the contract, normally it is 2 to 4 weeks rent charge. This prepayment is the precautionary for the tenant end the lease before the agreed date, therefore, the additional compensation may be applicable for any damage to the property. In most cases, the household expenses such as electricity, water and gas are included in the rent. However, some lessor may only cover part of these amounts, thereby we have to estimate these charges into our cost calculation.

We take accommodation near the university because it is convenient for our study. Hence the second feature we are interested is the location. When we meditate on this section, we should not only focus on the physical distant itself. Other factors like public transport availability, safety and daily life convenience should be considered as well. For example, the student accommodation provided by the university will certainly have the shortest physical distance to the school, but if the commute time is insignificant, there will be little difference for us to live in the suburb. The living environment around the property is important. A mature, safe social community allows us to prevent unexpected loss and dangers. If the accommodation site is near the town-centre, it will be easier for us to attain a part-time job in the area.

Comparison makes perfect, hence before we make any decision, we have to do our own investigation. Every property for rent will open for inspection, so what we have to do is to attend it by ourselves. The property can look entirely different than the picture. When we take the inspection, we must gather the following information: Is there anyone else sharing the rent, if does, how many, and what are other tenants’ background? Furthermore, is there a parking space available, or how far is the property away from the public transport station?Moreover, how is the interior condition of the building, is it furnished and is there any other specific requirements by the landlord? We should cover all of our interested topics during the inspection, due to the information is valuable in the decision process.

After we chose the accommodation, make sure we sign a contract with the lessor. This contract will clarify the uncertainties though out our rent and provide legal protections to our rights. In this contract, we should explicitly state: all the rental charges, including rates, security bonds,penalties, payment and other utilities expenses if applicable; Security, safety, maintenance and entry rights; the tenancy terms, the rent increase agreement and any other precautionary terms we would like to mention. Keep the contract within duplicate copies as well as the payment receipts, thus we will have evidence when there is a problem. In my opinion, we should always use a regulated real-estate agent to find renting information. For instance, http://www.realestate.com.au/, http://www.domain.com.au/ are the two available options. Even though the sub lessor is our friend, we still require a contract to avoid any unexpected situations.

In conclusion, the process of choosing accommodation is a process of gathering information. The more accurate and sufficient information we collect, the more choices will be available for us.

Day 43 The black swan theory

The black swan theory

Before the first black swan was discovered in Australia, European believed that there were only white swans existing throughout the world. Economists, therefore, used this metaphor to describe the drastic and unexpected events which have substantial effect over financial markets. For example, US ‘911’ terrorist attack, unpredictable government police implementation, and sudden decline in the crude oil price create fluctuation on financial markets which cannot possibly to be explained by the financial model are the black swan effects. Until now, there were three major black swan events affecting the global market in 2015. On purpose for a concise measure, we are going to study the reasons behind the capital inflow and outflow on the Chinese market. Thereby we will have a brief idea about the ‘trigger’ of these events.

Why is the net capital flow important for us on financial decision making?Under macroeconomics study, the supply of funds on the domestic financial market is based on national savings and foreign investments. We also know that financial products price rise when the demand to invest increases, due to the simple demand-supply relationship. We will use the share price to represent all other financial products next for convenience. As a consequence, the net capital inflow will raise the share price, and on the other hand, the net capital outflow will cause the share price to decline. According to the EPFR group statistic, the net capital outflow in China last week was 2.036 billion USD. This will put a potential downward pressure over the share price. Hence we can study the incentives of the net capital outflow, in order to compensate the source of fluctuations.

The first black swan event in 2015 was the World Bank lowered the global economic growth rate forecast. It stated that in the following two years, the growth in worldwide economy will be restrained by the trouble in euro-zone and major crude oil exporters. In this report, the growth rate in China would decline by 0.4%. A country’s GDP growth has large effect on its financial market, hence, the international investor withdrew from China, and the funds will flow towards America/India for the risk-averse purpose.That can be proved by the dramatic decline in CNY/USD exchange rate, because investor supply more CNY and demand more USD. As discussed before, that will have a negative impact over financial markets.

In addition, the Swiss National Bank(SNB) unexpectedly unplugged its three-year policy that maintained franc weaker than 1.20 per euro. Three years ago, the Swiss Nation Bank implemented an exchange rate ceiling towards the euro. At that time, Europe was experiencing the debit crisis, therefore the cap implied by SNB aimed to sustain the net export for Swiss. As a result, the franc has become the risk-averse heaven for European investors, which added a constant up-ward pressure over franc. However, the recent euro zone contraction has made the euro depreciated drastically. In order to maintain the exchange rate for franc towards the euro, the SNB had to use its USD reserve to purchase franc and supply in the market. This action caused heavy burden over the Swiss’ banking system, plus it forced the SNB apply a negative nominal interest rate at -0.25% in 2014. Eventually, the SNB predicted the euro would continue to depreciate against USD, therefore it stopped the exchange rate ceiling to lose this dead-weight. Right after this announcement, the franc appreciated by 30% towards euro and 22% towards USD. That caused a chain effect, firstly, the net export for Swiss would be damaged, which led the further decrease in nominal interest rate to -0.75%, because the SNB wished to force the commercial bank to supply more funds into the market. Secondly, the euro zone is wounded badly, that made the euro exchange rate fell 1.3% on the same day of the announcement. Moreover, a lot of international investors who expected a depreciation of Swiss franc suffered a tremendous loss. That also explained the net capital outflow from China, since the investors were pursuing the favorable appreciation of franc. 

The last unexpected even that tumbled the Chinese share market is the investigation proceeded by the China Securities Regulatory Commission(CSRC) over the stock price manipulation. There were 18 companies on the list, hence the share price declined corresponding to this event. Due to the principle of conservatism, both foreign and domestic investors will hold on their actions to avoid the uncertainties in the market.

The black swan events specified on the sudden variations internally or externally that affect the market. It cannot be predicted, thereby cannot be eliminated.Other factors like US economy’s recovery and the Federal Reserve System to rise interest rate normally are not classified as black swan events. Although they also led the net capital outflow from China, they can be reasonable expected.

Day 42 How do we apply for the credit transfer?

How do we apply for the credit transfer?

When we prepare our study in the university for a bachelor or postgraduate degrees in Australia, it is possible for us to apply credit for our prior learning(CPL). Not only in Australia, but also most of the universities implement the semester credit based system for evaluating students’ study progress. Therefore, we may obtain an absolute advantage if we are granted some credits before we start our university life. Whether we want to ease of some pressure on study or graduate earlier, and it saves the student contribution fee as well. Although it provides so many benefits, there are several criteria that we need to meet.

Generally, the credit for prior learning will be granted in three various approaches. The first and the most common type are by our previous Australian qualification framework recognition or other professional qualifications. This includes our study experience in the accredited Australian education institutions such as tafe, university and other approved institutions. In addition, the qualifications provided by professional bodies like CFA, CPA and ICAA will also be considered under this section of credit transfer. This approach has the highest probability to success, since these units usually have a distinct and concise outline which can be assessed by the CPL office. The second way for us to apply is through our previous informal/ non-formal learning. These can be based on our past work experience related to the subject we study, or the training received without a qualification. Sometimes it is hard for the CPL office to evaluate the weight of our experience, so the detailed statement is required. At last, our abroad qualifications may grant us some credits too. However, the university will ask us to provide sufficient evidence that proves these overseas educations match Australian standard

Once we made the application, the results should be carried out in three different outputs. Of course, the best outcome is we are granted with credit for specific units. Which can be the core units that are compulsory through the course. Alternatively, the credit transfers towards elective units are the next-best result. This occurs when the university has no comparative units with the applied ones. Moreover, the CPL office may ask us to attain further studies on the relative subjects. That is called preclusion, which is the same as the rejection, due to there is no credit granted.

After we understand how this system work, we need to prepare for our application. At first, we should find out the corresponded units under our current degree. This can be easily done with searching the course structure, and reading the specific unit handbook/outline on the faculty’s website. Make sure we created a clear spreadsheet table for it. This table will benefit both ourselves on checking relative information and the CPL officers on comprehending our request. Furthermore, we have to print out the unit outline/handbook for our preceding qualifications, which explains the course structure plus credit point weighting. That will provide a formal justification of the correlation towards our applied units. If we are proceeding with our work experience, make sure to obtain a referral letter from our employer. It will be the best if we can possibly ask our referee to state the relevance between our job and the specific units. Otherwise, we must declare it on our resume/personal statement. Similar to the AQF qualification, we need to provide the unit outline from our overseas learning. When the documents are not in English, we must translate it. During this process, we should choose the word carefully. Try to avoid using the words that are vague or have implicit meaning. We should always choose positive words, which create a favorable effect toward our application. When a sentence can be interpreted in multiple ways, the technique is to use the one that CPL officer is more pleasant to see.

The whole idea of applying for credit transfer is to acquire advantages for us on the starting point. The more distinct and accurate information we provide, the more chance for us to obtain a positive result. However, we need to always remember, it will only give us some upper hand in the study, so the outcome is substantially depended on our consistent endeavor.

Day 41 What does the advancement of the Internet brought us?

What does the advancement of the Internet brought us?

Since 1990s, the Internet boom has brought the global economic into a fast, long-term growth period. Many industrial countries and develop countries such as Australia and India experienced a tremendous economic expansion in the last 15 years. The Internet has totally changed our life pattern, it is in fact, the greatest invention in 19 centuries. So, the questions, why does the Internet apply such huge impact on our life?

The first and maybe the most important effect is the access to information. Imagine if we live in 1980s, the only possible way for us to acquire information it through social media or personal inquiry. For example, we had to wait for our offer results from the university to be published on the local newspaper, after that, we would physically travel to the university for accepting the offer and enrolling in units. In addition, if we wanted to obtain information of the newest product arrived, we had to check the model in the retail store. The access to information is important, because it associated with our cost to search information. In economists’ point of view, every attempt to gather information is a gamble, due to the return is uncertain and there are explicit costs for it. These costs tend to be higher as the difficulty to gather information increases. The Internet minimized the searching cost, thus we are allowed to acquire a decent amount of related information before we make the decision. As a consequence, other costs caused by the information asymmetry will be reduced as well. In addition, the information sharing technology has substantially expanded our knowledge stock. We can access the knowledge conveniently without attend specific field of study. Simply type our questions into the search engine, and we shall find the answer.

Another function of the Internet is the cost reduction, especially the labor costs. The online shopping enables the owner to operate the business with only a few employees or solely by himself/herself. The email and data transfer via the Internet leads to the global enterprises such as Huawei established the international integrate accounting centers, which dramatically cut the expenditure of local branches around the world. Furthermore, the costs of advertising and propaganda are reduced as well. The Internet had breached the monopoly of traditional media on advertisement, since the charge is relatively low and even more efficient. Government’s policies and legislation can be viewed online which saves a lot of paper works than before. Moreover, the information collection cost as stated prior and the travel costs incurred by it are also declined. We may gather information online with relatively no cost, that eliminates the shoe-leather cost during this process.

The Internet linked us with the world. Social websites like Facebook, twitter and blog help us to maintain our social contact with our friends. International news online keeps us on track on the events in the world. The international stock exchange market allows us to manage our investment in other countries via the e-commerce website. Hence the internet work as the connector between us and the world, which is perfectly interpreted by its name, ‘the interactive network’.

In conclusion, every benefit that the Internet brings us is based on its information sharing feature. Thereby the social optimal level of economic surplus should be reached by maximization this characteristic. If the government apply policies to restrict the freedom of the communication via the Internet, there must be a dead-weight associated. However, sometimes the social optimal levels are not applicable due to other issues like infringe of copyrights and society stabilization.

Day 40 Keep our handout organized

Keep our handout organized

We are required to provide a lot of handouts during our study and work. For instance, the assignments, reports, or application materials. In some cases, it is important for us to present the image that we are competent and sophisticated candidates. Therefore, we will want to keep our handouts well organized. Most employers or examiners prefer concise output, because they may face multiple applicants at the same time. The clear and straight-forward report will cost them the least time for evaluating our information, so they will tend to transform the extra benefit they gain to emotional tendency toward our application. 

The first rule to create an organized handout is maintaining the paper nice and tidy. We should always try to avoid hand writing by typing on computers. Although some of us may have beautiful hand-writing, the computer produces the paper work in a more unified standard. In addition, it is more formal, and making it formal means that we are taking the application seriously. The receiver will sense the respect from us toward our work, therefore, raise our judgment grade. Furthermore, we can utilize bullets and numbering to list our opinion effectively. It is extremely useful when we are trying to state several ideas in the same time. The conjunctions between sentences will create perplexity to the reader, hence they may skip it when time is critical for them. Unfortunately, that part may be our pillar of discussion, and the whole assignment is hinged on it. Thus, we must prevent that from happening by providing as much information as we can in summarized words.

The effectiveness of our word in a handout is contingent on our understanding to the task. We must interpret the ultimate goal of our handouts. Remember, what is crucial is the reader’s interest, not ours. Try to comprehend what do the readers of our application/report would like to see. To illustrate, our lecturer wants us to show our comprehension of the subject and the ability to apply our knowledge flexibly in the essay. The job interviewers are interested on the benefit we can contribute to the business, and they expect us to present it with our skills, qualities and experience. As a consequence, we have to determine the final goal of the handout, which is what are we seeking to obtain from producing this worksheet. Thereby use the clear target as the skeleton, we build the flesh and veins with details.

Moreover, we can always provide an index at the front. This action will generate great impact on the receivers’ first impression toward us. The index briefly explains the documents included, so the readers will have a general idea about the handout. It assists them on the following reading plus draws a vivid portrait of a very organized writer in their mind. We can create headers and footers to enhance this image, because that will make the readers feel like they are reading an intelligible book instead of some disarray paper works. These minor improvements will also help us on tracking our progress, hence we are able to outline more reasonable and precise statement corresponding to the topic.

The fundamental key for organizing our handouts it to minimize the readers’ time consumption cost without sacrificing much required information. The repeated evaluation of similar handouts will put a heavy psychological toll over the reader. So if we can both save the reader’s time and match our work output with his/her interest, the results will be decent without question.

Day 39 The power of habit

The power of habit

There are around ninety per cent of our daily behaviors base on habits. It is similar to the lower hanging fruit principle in economics. People tend to perform the activities with the lowest opportunity cost first. Which is the activity they perform the most, so there are no extra costs for establishing a new strategy. These habits can either be good or bad, therefore if we want to change our life, the first step necessary is to transform bad habits into good ones.

It is crucial for us to maintain self-awareness. Sometimes people with bad habits do not recognize it, hence they stick to it and confusing about the poor performance. So how do we define a habit is whether good or bad? In my opinion, we have to compare our current actions with its next-best alternatives. If the expected outcome from the other strategy is significantly better, we should consider our current habit is at least in some level inefficient. The term ‘bad’ may not necessarily produce negative results, but we can always obtain better outcomes based on our capacity. 

After we defined the bad habits, self-control has become the determinant to change it. In order to enhance our self-control, we should make plans down to the details for daily activities. The plan will basically work as a guideline and a restriction when we make decisions Without it, we can easily be driven by our old habits. Recalling our goal is to change it and not following it at the same pattern. For every habit, there is a cue or trigger that makes us to perform in that way. Based on my understanding, it can be internal such as our physical/psychological needs, or external like other people’s influences. If we assume people have no self-control at all, they will act fully corresponding to the cue. The detailed planning will transfer the cue on a specific time into the willingness to accomplish the listed event on time. In other words, we can say the plan somehow ‘distracts’ ourselves from that inducement of bad habit.

The ultimate target for a habit is to acquire the reward. Thus we have to set our own incentives to lure ourselves away from the bad habits. We may separate the final goal into short-period achievements, thereby the benefits are outlined clearly. We will be able to realize the actual rewards for us, if we keep up with the plan within a week, a month and a year. This will greatly promote our propensity of implementing good habits. Moreover, we should review our past performance, since the frustration of unaccomplished items, plus, the sense of achievement for fulfilling the plan will generate additional incentives for us to carry out better results in the next period.

In conclusion, our habits have the unlimited power to adjust our behaviors. If we can precisely diagnose the incentives and rewards we were seeking, assisted with decent self-control, we are able to change any of our habits as we want.

Day 38 The five C method for crisis management

The five C method for crisis management

During our lives, there will be many unexpected fluctuations. These pitfalls can be generated by the mistakes we made or unpredictable events in our life journey. Unfortunately, sometimes it is inevitable for us to face these frustrations and accept the maybe unfair challenges. I made mistakes in my life too, so I want to share my thoughts to guide ourselves to walk out of the downturn. I called it the ‘five Cs’ method, which stands for: Cautious, Courage/Confidence,Clear, Consistency and Conclusion.

We can avoid most of the dilemmas if we are cautious enough. So, we must always think carefully for the consequences of our next action. Be rational, consider base on our ability, benefits and opportunity costs associated with the decision we made. Only act if the benefits exceed the extra costs, and more importantly, we need to maintain self-control after the cost-benefit evaluation. In addition, we should prepare ourselves for the challenge, because it will catch you off-guard. Try to train our skills, obtain knowledge, observe and learn in daily life. Hence we will be robust to fight the unexpected battle.

When the challenge confronts us, we have to stay strong and show our courage. Running away from it has never been a solution, because the problem will not disappear itself. We have to keep in mind that, the progress to solve the trouble may be hard and painful, but if we do not take the first step, we will be trapped with it forever. What done is done, we cannot change our past mistakes. However, at least we are confidence to face the consequences. Although our courage and confidence will not guarantee our success, they will support us all along until we recover what we lost.

After we started to climb out the pitfall, it is crucial for us to clear our mind. We should identify our goal precisely. Ask ourselves the following questions: What is the reason for this straits? If our goal is to get rid off it, how do we do that? What are the internal and external factors that will affect our capacity to achieve that goal? The most efficient way to solve the problem is to work towards a clear and right direction. Furthermore, we need to develop the detailed plans to assist us in this process. The planning progress will help us to compensate out situation, so we are allowed to adjust the strategy effectively.

A perfect plan will be worthless if we cannot stick to it, therefore, the consistency of endeavor is required for our success. In order to do that, we can establish habits corresponding to the plan. The accumulated power of habit is strong and will aid our persistence. ‘Constancy will always be rewarded with repercussion’ a line from the movie ‘The Grandmaster’. Our consistency on hard-work eventually pays off, thereby promote our possibility to success.

I believe we can surmount all the obstacles in our lives at the end, but we need to conclude our experience after we overcome the difficulties. In order to prevent us from making the same mistakes again, we must gain from every problem we dealt with. ‘The failure is the mother of success’ the overused proverb, is indeed genuine. These experiences will remain as our wealth in the future, therefore, it will assist us on the first C term, precautionary.

The ‘five Cs’ establishes a complete cycle that provides some indications for confronting the challenges in our lives. In my opinion, to have courage to against the problem appears and maintain the confidence through this process are the fundamental factors. When we made mistakes, do not be afraid, because at least, our families are always with us.

Day 37 Summary 3

Principles of macroeconomics

Summary Chapter13-18

Chapter 13

Introduced in previous chapter, the economy's potential output is based on the average worker's productivity, so this chapter will further discuss the factors that affect productivity. The primary factors are the labor and capital stock. The optimal combination of these two factors will aid the firm to achieve the maximum productivity. In addition, those factors determine the rate of transferring labor and capital into output are the secondary factors. For instance, the technology, managerial expertise and skills are all secondary factors. According to the law of diminishing return on capital, the marginal revenue product of capital(MRPk) needs to be calculated. It defines the extra revenue received by a firm from selling the product obtained from an extra unit of capital. Similar to the marginal product of labor. The firm will have the incentive to increase the capital stock if the MRPk is at least great as the real interest rate, which is the opportunity cost for the firm to invest in capital. Therefore, the optimal capital stock level is when the costs of adding another unit of capital can exactly offset by the marginal revenue product. Furthermore, for another primary factor labor, the optimal labor number should hire by the firm is when the MRPl is equal to the wage. This can be rewritten to when the marginal product of labor is equal to the real wage. Bringing up the capital and labor factor together, a production function can be represented: which is , at which the A is the total factor of productivity(secondary). Therefore, we can predict if we hold either capital or labor constant, increase in capital/labor will raise the output at a diminishing rate. For more practical use, the Cobb-Douglas production function which utilize the specific parameter α. It represents the share of total income in the economy that is paid to the owners of capital. Given by the formula:, so we can also calculate the marginal product of capital with and the MPl with. Applying the Cobb-Douglas function, we can determine the economic growth rate in real GDP in terms of primary and secondary factors. Because of the constant scale of return, the proportion changed in output should be resulted from the exactly proportion changed on input.So, ;  and . The total growth framework will be .

Chapter 14

Both the national savings and investment spending represent the holding of resources from current income so it can be used to generate future benefits. As a consequence, in a closed economy, the saving is expected to be equal to the investment. The Solow-Swan model(Neo-classical) of economic growth focus on the capital formation in a country and to evaluate the relationship between the nation’s GDP per capita and savings(investments). Hence, the Solow-Swan model assumes the labor forces are held constant in an economy, then the production function will be rewritten into y=Af(k). Where y is the GDP per capita, and k is the capital-labor ratio which represents the average capital available for each worker. As studied before, the law of diminishing return of capital defines the increase in capital stock at the start will have a larger impact on output. Eventually the y will enter the steady state which the per capita capital stock is neither growing nor shrinking. Thus the per capita income is unchanging. To access further analysis, the investment on capital stock is divided into two categories: the replacement investment that is either to replace wor0out, depreciated capital or to provide capital to new workers. It does not change the size of the per capita capital stock. Another type is the net investment that adds to the size of the per capita capital stock. With rearranging the mathematical function, we can observe that the  that  is the saving rate on total income, d is the depreciation rate on capital stock, and n is the population growth rate The steady rate is when the capital-labor ratio is not changing, therefore it will occur when the saving of the economy is equal to the replacement investment. As a consequence, the economy growth only occurs when the savings have excess the replacement investment. The Solow-Swan function also predicts that poor countries will grow at a fast rate than rich countries as long as both groups of countries have the same long-run steady state. This hypothesis is called the convergence hypothesis, the reason behind it is the diminishing return of capital. Although the Solow-Swan model provides the insight of the savings and capital that affect economic growth, it ignores the impact on Solow-residuals(secondary factors). So than the extension model like endogenous growth model can be used.

Chapter 15

When an economy opens to free-trade, there are associated problems and benefits. In order to understand the future benefit in a concise layout, the present value of the return in the future has to be calculated. There are two types of commodities are trading on the international market, the merchandises and the services, defined by the WTO. The gap between the import and export for a country indicates it economy is experiencing a trade deficit or trade surplus. Obviously, if the price on a specific good in an economy is greater than the world price, the economy will tend to be come a net importer of that product. In contrast, the economy will become the net exporter of that good or services. As discussed in previous chapter, the consumers of imported goods and the producers of exported goods are the winner form global trade. On the other hand, the consumers of exported goods and producers of imported goods are the losers. In order to compensate the losers in world trade and reduce the trade deficit, the government adopts tariff and quota on the imported goods. The tariff acts as an increase in the world price, so the excess demand corresponding to that price is reduced. The quota restricts the volume of imports that can enter the country, so it acts together with the supply. which shift the supply curve to the right as to reach a new equilibrium level. Neither the tariff nor a quota creates economic efficiency, since there is always a dead-weight loss in the total economic surplus. Many nationals establish free-trade agreement to against the inefficiency generated by the trade barriers. The factor price equalization theory claims that countries which trade freely with each other will have the same ratio of payments to capital and labor as each other. Therefore it will reduce the inequality. However, the trade will also bring the countries having the least stringent environment regulations to become a pollution heaven for the industrial countries.

Chapter 16

The exchange rate for a country’s currency can be determined with different policies: the flexible exchange rate, which the rate varies according to the supply and demand for the currency in the foreign exchange market. Alternatively, the government can use the fixed exchange rate police, that set an official rate and maintain it with government force. When trading in the international market, the real exchange rate is essential for the firm to compare the relative price of product. It can be calculated with divide the price of domestic good by the price of foreign goods values in domestic currency. A high real interest will reduce the net export value, therefore, the total output in an economy. The exchange rate between two countries can be determined by the purchasing power parity, which assumes the currencies of countries that experience significant inflation will tend to depreciate. This is an implication of the law of one price, so in the long-term when the transportation costs are relatively low, compare the price of a basket of domestic commodities with the price of an exact basket in another country, will represent the relationship of the two countries nominal exchange rate. Inflation implies that a nation’s currency is losing purchasing power in domestic market, whereas depreciation indicates losing purchasing power in the international market. In the foreign exchange market, the nominal exchange rate is determined by the supply and demand of the currency. The market equilibrium is called the fundamental value of the exchange rate. The suppliers in the foreign market supply the domestic currency in order to settle foreign transaction or purchasing foreign assets. Hence the supply will increase if there is an increase on preference of foreign goods, the domestic real GDP or the foreign real interest rate. The demander in the market, on the contrary, is pursuing domestic goods and assets. Therefore, when the reserve bank applies a tighter monetary policy that leads to a high real interest rate, the demand of domestic currency will increase and pull up the nominal interest rate. Consequently, the high real interest rate will not only reduce the aggregate demand of consumption and the investment spending, but also the export due to the high nominal exchange rate. A country may want to maintain a fixed rate of its currency, and if this fixed rate is higher than the fundamental value, it faces a devaluation pressure. So the government needs to use its international reserves to provide balance-of-payments by purchasing the excess supply of the currency. However, the international reserve is not unlimited, plus the fear of devaluation may cause a speculative attack by foreign investors, which creates more excess supply in the market. Thus the government may choose to set up import barriers to reduce the supply of domestic currencies. It is extremely costly to the economy so the more common way is to raise real interest rate by a tighter monetary policy. That will bring the demand of currency to a higher level, so the fixed exchange rate can be maintained. But the reserve bank will lose control over the stabilization force of inflation.

Chapter 17

The balance of payments is a record kept by a country for all transactions made between the country and other nations. This record is divided into two sectors: the current account and the capital account. The current account records transactions leading to a change of ownership of commodities or a direct flow of income or other similar payment. To illustrate, the accounts in this sector include: the balance on merchandise trade, net services, net income,  current transfers. The merchandise trade are the net balance of a country’s total exports and imports, it will be a positive amount if the country is experiencing trade surplus. These amounts are measured free on board, which the freight and insurance charges are assumed to be paid by the purchasing country, recorded as the net services. The net income is the direct income such as interest, dividend and royalty payments from overseas. People live overseas receive income in domestic will be recorded as a debit item. Current transfers are those one-off transactions that are not recorded elsewhere in the current account, such as a fund from new migrants, or the foreign aid to developing countries. If the currency needs to be exchange to foreign currency to make the transaction, it is a debit item. If the transaction leads to an outflow of foreign exchange, it is recorded as a credit. On the other hand, the capital account records all transactions that are related to acquisition of either an asset or a liability. There are three accounts to be reported: the net capital transfers, the nest acquisition/disposal of non-produced, non-financial assets, and the balance on financial account. The capital inflow is when domestic resident selling domestic assets or borrowing from foreign lenders. In contrast, the capital outflow is domestic citizens purchasing foreign assets or invests in foreign financial products. The capital inflow/outflow is determined by the return and risks in the both domestic and international market. In any given period, the sum of the balance in current account and capital account equals to zero. That is because the domestic currency held by a foreigner must be used to purchase goods, services or asset from domestic residents. As stated before, the investment expenditure is supplied by the national savings in and closed economy. But in an open economy, the firm may borrow from foreign agents, so the investment is equaled to the national savings plus the net capital inflow. However, if the domestic real interest rate is high, the excess supply of funds will create a capital outflow, vice versa. By rewriting the equation Y=C+I+G+NX, we can find out the net export is the national savings less the investment, so the low national saving level can have a enormous impact over net export.

Chapter 18

The Keynesian economists look to the aggregate demand side of the economy to explain business cycle fluctuations. They believe that government management of the macroeconomics is required to maintain a high level of aggregate demand so that economy can avoid recessions. Monetarists disagree with the view that the economy has a tendency to move into recession. They view inflation is the major threat to the ability of the market to efficiency allocate resources. The new classical macroeconomics assumes that the agents within the economy have rational expectations, so people will adjust their behavior in ways that ensure that output is unaffected. Macroeconomics is constantly evolving, so there will be more endeavors required in the future

Day 36 Summary chapter 7-12

Principles of macroeconomics

Summary chapter 7-12

Chapter 7 

The Keynesian model introduces the idea that a decline in aggregated spending may cause an output gap. It assumes that in the short-run, firms set a particular price to meet the demand during that period, instead of responding to every change in demand by adjusting their prices. Because of  this, the planned aggregate expenditure in an economy can be different with the actual aggregate expenditure. The major reason behind the difference is the investment spending were varied by the inventory investment. Firms may or may not be able to sell the expected quantities of products. In order to perform further analysis, the Keynesian model also provides a consumption function, which defines the total consumption is determined by the exogenous factor such as wealth effect, consumer's faith, and other variables that are independent of output. Plus the disposable income times the marginal propensity to consume. As we studied before, the output gap exists when the actual out put is large or less than the potential output. So as to identify the short-term actual output, we need to find the short-run equilibrium output. This value shall be obtained with two approaches, the first one is with the 45-degree diagram(Keynesian cross)’s interception with the PAE curve. Which means at this point, the PAE equals to the actual short-run output, in other words, the actual aggregate spending. If the output lies lower than the PAE, it indicates that the planned investment is larger than actual investment spending. Therefore, the inventory stock must be lower than planned, the firm is selling more than expected. At first, the firm will meet the demands by run down inventories, but eventually it will boost productions. Which is a up-ward movement along the PAE curve until reaches the equilibrium. This is the market self-correction power. In addition, the circular flow of income explained the economy's equilibrium can be reached when the total injections( all exogenous expenditure, investment, government spending and net export) can be exactly offset by the total withdrawals(part of income not used for consumption purposes, savings, tax, and imports). Similar to the application of the Keynesian cross diagrams, when injection is larger than withdrawal, the demand domestically increases, which leads an increase in production. In a more concise explanation, the S(WD)=Y’-CY’Y’<Ip(Inj), therefore, Y’<C+Ip. In this equation, we can observe that the demand exceed the output,so the increase in production will be carried out to meet that demand.In a four sector model, we can draw a conclusive equation for planned aggregate expenditure at . Where (c-m)(1-t) is the income multiplier factor x, in the function 1/(1-x) The multiplier indicates the effect of a one-unit change in exogenous expenditure on short-run equilibrium out put. Due to the change in the exogenous factor will affect other people’s income and spending as well. Hence the multiplier is used to calculate the overall aggregated effect on the economy. With the equilibrium output, we can check the economy is experiencing an expansionary gap and contractionary gap, so the government and reserve bank will take procedures to eliminate these gaps.

Chapter 8

The fiscal policy is the economic policy imposed by government focus on the economy's stabilization. Generally, it aims to pull the country out of recession. It can be done with two methods. Firstly, the government can increase in its aggregate expenditure. Under the assumption o Keynesian model, it will pull the PAE cure up-ward vertically, so the planned aggregate expenditure will match the potential output quantities. In addition, the government can vary the tax rate, which indirectly affect the aggregate spending. As we learned in chapter 7, the induced factor of the PAE is expressed as(c-m)(1-t), therefore, the change in t will vary the slope of PAE, which is straight-forward, since the less tax charged on income, the more income can be spent. The transfer payment such as baby bonus is a balanced budget multiplier and will actually reduce the output. Because the reduction on exogenous components in tax is financed through the reduction in government spending, but the increased amount is combined with the savings plus additional spending.()The fiscal policy can affect the potential output by investing in public capital, which will raise the economy's productivity. However, the prolong legislative process reduces the flexibility for fiscal police to react timely as a stabilization tool. Furthermore, the fiscal policy creates budget deficits that decrease national savings to benefit the economy in the future. Although with these shortages, it is still an important stabilizing force, due to the automatic stabilization function. When there is a recessionary gap, the tax collection falls automatically, while other welfare transfer payments rise without explicit actions by government. Moreover, the fiscal policy can be used to against the deferred long-term contraction. Income inequalization has been a problem to industrial countries over many years, and the specific fiscal policy such as the progressive tax system will help to redistribute wealth. We should use the Gini coefficient and the Lorenze curve to gain a visualized idea of a society’s inequality. The lower the Gini coefficient the more equal we would say is the distribution of income. Related to the fiscal policy, the tax smoothing theory states that the government should run a budget surplus to save for the future anticipated high spending. The government spending has to be financed either through raising taxes or by government borrowings. With the same equation, we can conclude that if the government keeps running a budget surplus( where tax collected can cover the spending and transfer payments), the public debt will eventually be fully paid off. That is crucial to the concept of inter-generational equity. In conclusion, conclusion, the fiscal policy acts as the stabilizer of economy and society, it has to deal on the problems corresponding to the demo-graphical changes, as well as, the economy's recessions.

Chapter 9

Money carries three functions: the medium of exchange, store of value and unit of account. For concise distinction, economists measure money in four different categories: the currency also called M0, which is the notes and coins floating on the market; the M1, which is the currency plus current deposits; M2, which is the general definition of the money supply, is the M1 plus other less liquid money such as savings on both long-term and short-term. M3 is M1 plus all bank deposits of the private non-bank sector, for instance, the commercial notes or debentures. The integrated amount is the broad money. In an economy, the money supply is the currency held by public plus the deposits. The money deposited in the bank will generate a circulation effect, that allows the bank to supply money to the market corresponding to its desired reserve ratio. The main reason for this is people will re-deposit the loan money into the bank. Hence the money supply from the bank can be calculated as Bank reserves divided by the desired reserve/deposit ratio. Thereby the total money supply in the market will be the currency plus the bank deposits. The money stock is directly linked to the inflation in the long-run. The velocity measure the amount of expenditure can be financed from a given amount of money over a particular time period. With the same equation, we find out the price level is based on the money stock, while holding the velocity and output quantity constant, As a further implication of this connection, the reserve bank(central bank) maintains the inflation rate through the overnight cash rate. The overnight cash market is a special financial market where commercial banks borrow and lend money, in order to maintain the exchange settlement account balances The reserve bank lowers the cash rate by open-market purchase activities, so the financial assets in the commercial bank are purchased by the government. As a consequence, the commercial banks have more money in their exchange settlement account, thus they are willing to supply more funds in the overnight market, then the cash rate will drop. On the contrary, the reserve bank raises the interest by open-market sales. The long-term interest rate is linked to the cash rate, thus the reserve bank can adjust the interest rate corresponding to the inflation level during the period.

Chapter 10

When an individual develops the portfolio allocation decision, he/she determined the individual demand of money. However, there is an opportunity cost of holding money on hand, the nominal interest rate determines that returns can be gained by investing the money into financial assets. According to the cost-benefit principle, people will choose to hold money only if the benefit exceeds the cost. In this case, the benefit for holding money is affected by the real income which increases the incentive to consume, and the price level due to more money is required to settle transactions for higher price. Therefore, individuals will choose to maintain more money on hand when the nominal interest is low, or the price and real income are high. On the other hand, the supply of money is determined by the reserve bank’s open-market operations, so the curve is vertical since its not affected by the nominal rate. Like other demand-supply curves, the interception indicates the equilibrium level in the money market. In order to explain the process of reserve bank adjusting nominal interest rate, it is critical to comprehend the bond price identification factors The essential part is, when the nominal interest is high, the bond price drops. That is because the buyer will rather to invest on other financial assets if the nominal rate is higher than the coupon rate. So the price of the bond needs to be lower to compensate the opportunity cost for buyers. Therefore, when the money market is at disequilibrium, individuals are not happy with the proportion to their wealth held as money, then they will purchase/sale bonds. These actions will increase/decrease the price of bonds, so the nominal interest rate will decrease/increase in the contrary of bonds price. The variation in nominal interest rate will affect people’s behavior to hold money until the equilibrium is reached.The borrowers and lenders in financial markets are considered rational. Hence if the reserve bank lowers the cash rate in the overnight market, it is reasonable the suppler of the bonds will seek to borrow at that market for the lower rate. In addition, the lender in the overnight cash market will become the demander in the bond's market, pursuing the higher rate of return. As a result, the demand of bonds will increase and the supply of bonds will decline. The rise in bond price will lead the reduction in nominal interest rate. Consequently, the aim of the reserve bank, which is to reduce the overall nominal rate is achieved. That is how central banks influence the demand of money by adjusting nominal interest rate. Although the reserve cannot control the supply of money and targeting an interest rate at the same time, the monetary policy enables it to adjust real interest rate in the short-run, since the inflation is slow to adjust. Because the higher interest rate will encourage saving and therefore, reduce spending, the reserve bank can reduce interest to stimulate aggregate expenditure. The contractionary gap can be eliminated as well as the expansionary gap.

Chapter 11

The aggregate demand curve is used to describe the relation between the output(aggregate spending) and the inflation rate. It is downward sloping due to the higher inflation rate will create uncertainties for expenditure, reduce the wealth holding and enormously reduce the export value. Changes in exogenous factors that are independent from output or real interest rate will shift the aggregate demand curve. In addition, addition, the tighter monetary policy which set interest higher for each given rate of inflation will reduce the aggregate demand and shift it to the left. The aggregate supply is based on the short/long-run inflation rate. In short-term, we assume that firms do not adjust their price corresponding to the demand, so the SRAS is a horizontal line. The long-run aggregate supply indicates the economy potential output. The short-run equilibrium indicates the actual output level under the current inflation rate, the economy tends to correct itself when there is an output gap. Thus, if there is an expansionary gap, firms will raise the price to match the excess demand. It there is a contractionary gap, firms will cut the price as to sell more. As a result, a result, giving enough period of time, the economy itself will eliminate the output gap and achieve long-run equilibrium. By studying the AD-AS model, the source of inflation is clear. It can be caused by the increase in exogenous components that shift the AD curve to the right. That will create an expansionary gap, so the inflation will rise as stated before. Another source of inflation change is the inflation shock, which adverse inflation shock raises the current inflation rate, and favorable inflation shock reduces the inflation rate. The adverse inflation shock will bring the inflation rate up, therefore the reserve bank may choose to ease its monetary policy to eliminate the recessionary output gap. There is another type of shock to potential output, that will decrease the long-run aggregate supply, hence create an expansionary gap. As a consequence, the inflation rate will increase till the new long-run equilibrium. Both of the adverse shock in inflation and the shock to potential output are the aggregate supply shock, which will reduce output and increase inflation. For the purpose of inflation control, the central may choose to tighter their monetary police before an anticipated rise in inflation. This will deliberately create a recessionary gap with shifting the AD curve to the left, thereby the inflation rate can be expected to fall. The public’s expectation and the inflation rate are mutually affected. The higher the predicted inflation, the more proportion of wages people will ask to rise. This will make the firm to raise the price to cover the cost, so the inflation will increase. And vice versa.

Chapter 12

Economists use the growth in GDP per capita to measure the economic growth in the long-run. The potential output will affect the economic growth on a larger scale, and the essential factor that influences the output is the labor productivity. The GDP per capita can be rewritten into the function average labor productivity times the share of population employed. So the quantity of goods and services that each person can consume is based on: how much each worker can produce, and how many people are working. The human capital and physical capital will determine the average labor productivity. The human capital is the skills, education, inborn talent and other features that affect an individual’s ability to produce. The physical capital is the equipment, technology, resources, political environment and entrepreneurship that increase the labors’ efficiency. The marginal return on an additional unit of capital tends to diminish beyond some point, hence the firm will use each piece of capital at maximum productivity. Since the amount of labor and other inputs are held constant according to the demand of labor in chapter 5, the easiest way to explain the diminishing return on capital is there may not be enough workers to operate the new added capital. The scarcity principle states that there must be something to be sacrificed at present to exchange for the future growth. Consequently, the economic growth is associated with cost at present Which is the cost to acquire new capital and the workers’ health/safety. These cost reduced the current living standard as to obtain benefits in the long-run. In conclusion, the economic growth can be promoted by any polices that improve the human capital and physical capital. To illustrate, policies that encourage savings that supply the funds for new capital investment; the policies that support research on new technologies, because new technology will stimulate the investment spending, and the legal framework to maintain the stability.