May 2006 Archives

MY GOAL WILL BE TO HAVE EVERYTHING GRADED AND UPDATED BY TUESDAY. WE CAN TOUCH BASE TO MAKE SURE YOUR GRADE IS WHERE YOU THINK IT SHOULD BE...

Here's another quick link to the Naked Economics "Bonus and Make-Up" Blog Entries...

Microeconomics and International Economics Exam

The short answer problems have been posted on the blog for some time, but here's another link to the problems...

Multiple Choice - Remember, this is 20 questions, and it is open notes/computer. (Note that did NOT say "open neighbor.") For those of you worried about not having enough time on Thursday, I will also be available Friday during the same time.

"New Ideas from Dead Economists" Clearly, we don't have time to do justice to the "luncheon" that was originally scheduled. Instead, you've been asked to do this with the chapter that you selected: Please briefly summarize several main ideas and/or comment on the usefulness of the chapter you read in terms of helping you understand economics. This should be no more than a 1/2 page. You can get credit for this in one of three ways: 1 - Printing it out and turning it in. 2 - Sending it to me via email. 3 - Posting a comment on THIS blog entry. Remember that this is worth 10 points.

This is it. The final week of the "third hour experiment."

Here's another quick link to the Naked Economics "Bonus and Make-Up" Blog Entries...

"New Ideas from Dead Economists" Clearly, we don't have time to do justice to the "luncheon" that was originally scheduled. Instead, you've been asked to do this with the chapter that you selected: Please briefly summarize several main ideas and/or comment on the usefulness of the chapter you read in terms of helping you understand economics. This should be no more than a 1/2 page. You can get credit for this in one of three ways: 1 - Printing it out and turning it in. 2 - Sending it to me via email. 3 - Posting a comment on THIS blog entry. Remember that this is worth 10 points.

Microeconomics and International Economics Exam

This is the other thing we've still got going on. The short answer problems have been posted on the blog for some time, but here's another link to the problems...

Multiple Choice - Remember, this is 20 questions, and it is open notes/computer. (Note that did NOT say "open neighbor.") For those of you worried about not having enough time on Thursday, the test is available for you to start today. OF COURSE, IT CANNOT LEAVE THE ROOM WITH YOU. All of Thursday is also set aside for completing the multiple choice portion of the exam.

IF YOU HAVE YET TO DO SO, YOU ALSO NEED TO PICK UP A CHAPTER FROM NEW IDEAS FROM DEAD ECONOMISTS FOR TUESDAY'S LUNCHEON HONORING THEIR CONTRIBUTIONS.

NOTE THAT I POSTED SHORT-ANSWERS FOR NEXT THURSDAY'S TEST AS A SEPARATE BLOG ENTRY.

THE FINAL "SMALL GROUP" SESSIONS WILL BE DEDICATED TO EXAM REVIEW AND ANY NECESSARY CATCH-UP. I also have a review sheet for you.

Globalization Forum: We'll come together for the Third Annual Mounds Park Academy Globalization Forum. Each of you represent a different perspective.

TODAY'S GOAL WILL BE TO FINISH AS MANY OPENING STATEMENTS AS POSSIBLE. REMEMBER THAT YOU GET UP TO 10 POINTS FOR PARTICIPATION IN THE FORUM. For openings, I'm thinking somewhere more than a minute, but not much more that 2, as we have a lot of people to hear from.

We'll allow people to speak in whatever order, but be sure that you clearly identify your "position" for us.

Obviously, you will need to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

I know, there's a Concert Choir conflict. We'll try to hear as many choir folks"introduce" themselves as possible before you need to go...

IF YOU HAVE YET TO DO SO, YOU ALSO NEED TO PICK UP A CHAPTER FROM NEW IDEAS FROM DEAD ECONOMISTS FOR FRIDAY/TUESDAY'S LUNCHEON HONORING THEIR CONTRIBUTIONS.

NOTE THAT I POSTED SHORT-ANSWERs FOR NEXT THURSDAY'S TEST AS A SEPARATE BLOG ENTRY.

THE FINAL "SMALL GROUP" SESSIONS WILL BE DEDICATED TO EXAM REVIEW AND ANY NECESSARY CATCH-UP.

Globalization Forum: We'll come together for the Third Annual Mounds Park Academy Globalization Forum. Each of you represent a different perspective.

TODAY'S GOAL WILL BE TO HEAR AS MANY OPENING STATEMENTS AS POSSIBLE. REMEMBER THAT YOU GET UP TO 10 POINTS FOR PARTICIPATION IN THE FORUM. For openings, I'm thinking somewhere more than a minute, but not much more that 2, as we have a lot of people to hear from.

We'll allow people to speak in whatever order, but be sure that you clearly identify your "position" for us.

Obviously, you will need to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

Exam #2 - Micro and International Economics These questions (actually ANSWERS to these questions) should be turned in by Friday, May 26th.

Problems: (10 points)

There is only one "problem" here, but it has a number of parts. In each case, your answer will simply be a graph of demand and/or supply. (Many answers are possible, so you simply need to reflect one logical outcome for the information you are given.)

a. 1 point - Draw a demand curve (label the two axes appropriately).

b. 1 point - Draw another demand curve. Label any point on the curve as "A". Assume the price of the good increases. Reflect one possible result of that change on the graph as "A2".

c. 2 points - Draw another demand curve. (It's for a fictional food product.) Assume that a new report has proven that this food increases both intelligence and physical strength. Show the effect of this report in terms of its impact on demand.

d. 2 points - Draw a pair of axes. Show four demand curves. Label them as elastic (E), inelastic (I), perfectly elastic (PE), and perfectly inelastic (PI). Make sure each curve reflects the appropriate defintion.

e. 2 points - Draw a simple demand and supply graph. Label the equilibrium price point with "E". Assume that income of consumers increases, and that this is a normal good. Show an appropriate new equilibruim point and label it "E2".

f. 2 points - Draw a simple demand and supply graph. Label the equilibrium price point with "E". (Assume that it is for rental housing.) The government institutes a "price ceiling" that is below true market value. Show a possible price ceiling and its effects on supply and demand on the graph.

Short answer: (20 points - 5 points each)
You need to do four of the following "short answer" questions. Choose any four that you would like from the list. Answers should be between 300 - 500 words or so. You can either print them out or submit them electronically to me as an e-mail attachement.

A. Through some sort of miracle, that little dude with the monocle from the Monopoly game comes to life and wants to talk to you. He doesn't understand why monopolies have long been regulated and/or broken up in the United States. Explain to him some of the reasons why. (Do not pass Go. Do not collect $200.)

B. You and one of your Economics classmates have recently been elected the leaders of two of the world countries. Using specific examples (names, products, and countries), demonstrate your understanding of the terms "absolute advantage" and "comparative advantage".

C. Assume that you are teaching a class of second graders some basic economic principles. You need to explain why the nations of the world benefit from trade. Keeping in mind that the authors of The Armchair Economist will sue plagiarists, develop an analogy or story that gets this point across. (By the way, The Armchair Economist was the source of the "Iowa Car Crop" story...)

D. You are the new headline writer for the StarTribune. Tomorrow's issue is a special edition devoted to globalization. You are in charge of writing five "headlines" for the pro-globalization forces and their best arguments and five "headlines" for the anti-globalization forces and their best arguments. What would those headlines be?

E. The rest of the world has gotten tired of arguing about globalization. They have left you to cast the deciding vote. Is gloablization helpful or harmful? Why?

F. You have been named the President of the World Bank. You unexpectedly have an additional $10 billion in funds to loan out for the purposes of development assistance. In broad terms, tell us what you would do with that money. Where/how would you spend it?

G. Any other bright ideas for questions that you would like to tackle? If so, let me know...

NOTE THAT I WILL POST SHORT-ANSWER FOR NEXT THURSDAY'S TEST AS A SEPARATE BLOG ENTRY. YOU ALSO NEED TO PICK UP A CHAPTER FROM NEW IDEAS FROM DEAD ECONOMISTS FOR FRIDAY/TUESDAY'S LUNCHEON HONORING THEIR CONTRIBUTIONS.

THE FINAL "SMALL GROUP" SESSIONS WILL BE DEDICATED TO EXAM REVIEW AND ANY NECESSARY CATCH-UP.

Globalization Forum: Today (and Wednesday), wel come together for the Third Annual Mounds Park Academy Globalization Forum. Each of you represent a different perspective.

TODAY'S GOAL WILL BE TO HEAR AS MANY OPENING STATEMENTS AS POSSIBLE. REMEMBER THAT YOU GET UP TO 10 POINTS FOR PARTICIPATION IN THE FORUM. For openings, I'm thinking somewhere more than a minute, but not much more that 2, as we have a lot of people to hear from.

We'll allow people to speak in whatever order, but be sure that you clearly identify your "position" for us.

Obviously, you will need to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

Here are some resources that you might consult:

Think Global: Public Radio Collaboration 2005 This is a brand new site. There's a lot of good stuff here.

The Lexus and the Olive Tree There are some excerpts and reviews here that you might find interesting.

Globalization: Threat or Opportunity? This is an IMF report addresses many of the central issues in globalization.

The International Forum on Globalization This is the site of a group critical of many of the effects of globalization.

The World is Flat: A Brief History of the Twenty-First Century This is a talk by Thomas Friedman about his most recent book.

Globalization and Its Discontents - Joseph Stiglitz (He won a Nobel Prize for Economics...)

In Defense of Globalization - Professor Jagdish Bhagwati

If you missed the last session, please go back and read up on extra credit and blog "make-up" options. That should help a number of you.

We previewed upcoming activities and set up a couple things at our last meeting. Today, we'll dig into the "substance" originally posted on the last lesson...

GLOBALIZATION: Many people argue that this force of integration will come to characterize this era as much as the Cold War had dominated the previous era. Author Thomas Friedman argues that the "Web" has replaced the "Wall" as the symbol of the era.

What is globalization? Simply put, this is the increasing integration of the world through the forces of global trade, business, and finance.

Thomas Friedman's book, The Lexus and the Olive Tree: Understanding Globalization, has become the most widely-cited book on the topic. (Yes, his recent work, The World is Flat is also being widely cited...) He has a number of very useful metaphors and explanations. You'll be asked to read one of the chapters for Thursday.

A couple of Friedman's ideas:

The Title: The "Lexus" represents the forces of modernity and technology. It is the "drive for sustenance, improvement, prosperity, and modernization." The "Olive Tree" represents "everything that roots us, anchors us, identifies us, and locates us in the world... a family, community, tribe, nation, religion, or home."

There are three balances in the global system:

* Balance between nation-states: The United States has clearly emerged as the sole superpower.

* Balance between nations-states and global markets: Friedman calls the global market of investors the "Electronic Herd". They trade in the global financial centers he calls "Supermarkets".

* Balance between individuals and nation-states: The emergence of people that he calls "Super-empowered Individuals" is a new factor to consider. Some are very angry, others are wonderful.

The "Walls" come down... Friedman argues that the Cold War era gave way to the era of globalization as a result of three fundamental changes.

* Democratization of Technology: caused by advances in miniturization, computerization, digitization, etc. (Computer power has doubled roughly every eighteen months over the past thirty years.)

* Democratization of Finance: caused by computerization, investment technologies, access to financial markets, etc.

* Democratization of Information: spread through things like the Internet, satellite dishes, and television

BELOW IS THE INFORMATION FOR OUR "MPA GLOBALIZATION FORUM" THAT WILL BE HELD OVER THE NEXT TWO CLASS SESSIONS. You earn up to 10 points for your opening comments and participation.

Globalization Forum: Next Monday, we will come together for the Third Annual Mounds Park Academy Globalization Forum. Each of you will represent a different interest.

* You are allowed (within limits) to select your role for this forum. I do need certain perspectives represented, but you can take creative liberties within those limits.

* You will be expected to provide an introductory statement of not less than ninety seconds. In this statement, you will tell other participants of your "situation", and you will offer your preliminary comments on events associated with globalization.

Obviously, you will need to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

* In order to help me know who is "who", I'd like you to prepare a "nametag" for our use. Give yourself a name and brief "title" or description. Make them big enough for us to read.

For example: "Adam Wilson - owner of Dell Computers" or whatever...

* Do whatever research in class that might help you create your "perspective" and better understand the issue of globalization.

Here are some resources that you might consult:

Think Global: Public Radio Collaboration 2005 This is a brand new site. There's a lot of good stuff here.

The Lexus and the Olive Tree There are some excerpts and reviews here that you might find interesting.

Globalization: Threat or Opportunity? This is an IMF report addresses many of the central issues in globalization.

The International Forum on Globalization This is the site of a group critical of many of the effects of globalization.

The World is Flat: A Brief History of the Twenty-First Century This is a talk by Thomas Friedman about his most recent book.

Globalization and Its Discontents - Joseph Stiglitz (He won a Nobel Prize for Economics...)

In Defense of Globalization - Professor Jagdish Bhagwati

Those of you that have “0” recorded for any blog entry may substitute an entry on one of these questions for that missing score. You can receive a maximum of 4 points for these entries. You can do as many as you need from this list.

Extra credit: Everyone can submit one “bonus” blog entry for extra credit. You can receive a maximum of five points for that entry.

All entries must be posted by Thursday, May 25th in order to receive credit.

From Chapter 12 – “Development Economics”

1. It’s a pretty good question on page 207. “At a time when we can split the atom, land on the moon, and decode the human genome, why do 2.8 billion people, or roughly half the world’s population, live on less than $2 a day.” What do you think?

2. From page 208 onward, Wheelan (in bold type) lists a “sample of the kinds of policies” that “make the difference between the wealth and poverty of nations.” Choose the one factor that you find most significant and explain your rationale for that choice.

3. There are a ton of interesting statistics and examples in this chapter. Select the three you found most interesting and/or surprising and explain why you chose them.

4. Wheelan likens the World Bank and International Monetary Fund to the world’s “welfare agency” and “fire department,” respectively. Based on what you’ve learned, are those characterizations accurate? How well do you feel that they do “their jobs?”

From "Epilogue: Life in 2050"

One question here, with seven variations… You’ve got your own crystal ball. Take any one of the “seven questions worth pondering about life in 2050” and give me your prediction/forecast for what the reality will be when you all are contemplating retirement (or traveling the nation in your RV) in 2050.

NOTE: As of now, there is a lag between your submitting a post and its appearance on the blog. I have to "approve" them by clicking on them. Don't resend.

REMINDER: In order to receive credit, these comments need to be posted by 3:30 PM on Friday, May 19th. Remember that this is a public site, and you are responsible for the content of your postings.

At some time this next week, you are supposed to read Chapter 11, “Trade and Globalization.” You should post a response of at least one good paragraph to one or more of these questions. (You can also react to other posts.)

1. That “machine” that converts corn into things like stereos and cars has reappeared. (page 187) Is this just too simple an allegory for trade? Is it effective? Explain why or why not.

2. Did the discussion on economic sanctions of page 194 lead you to any new conclusions or positions on that topic? (If so, explain. If not, I’d recommend answering a different question…)

3. We’ve talked about sweatshops a number of times. It’s your turn. You’ve read the section about the “comparative advantage” of workers in poor countries. (page 201) As the semester ends, give us your answer. “Should we sweat about sweatshops?” Why or why not?

4. “Preferences change with income, particularly with regard to the environment.” (page 203) Discuss…

NOTE: As of now, there is a lag between your submitting a post and its appearance on the blog. I have to "approve" them by clicking on them. Don't resend.

REMINDER: In order to receive credit, these comments need to be posted by 3:30 PM on Friday. Remember that this is a public site, and you are responsible for the content of your postings.

At this time, you are supposed to have read Chapter 9, “Keeping Score.” You should post a response of at least one good paragraph to one or more of these questions. (You can also react to other posts.)

1. After you finishing reading the joke on page 149 you tell yourself, “I can be funnier than that.” Here’s your chance. Write an anecdote, story, joke that makes a commentary about our current economy. Keep it clean, and no stealing someone else’s material…

2. After reading about the Gross Domestic Product, assess its usefulness as a measure of economic progress. Is there another measure you think we should use?

3. During the Great Depression, FDR once said that we have “nothing to fear but fear itself.” (page 157) Is that good economic advice for today? Explain why or why not using a specific example or examples.

4. We’ve spent time talking about both monetary and fiscal policy. (pp. 159-160) Assume that an economic recession is on the horizon. Which of these tools, or what combination, would you want government to use?

NOTES: Grades should be caught up (or close). Check those out. We'll set up the MPA Globalization Forum today, and it will take place next Monday/Wednesday. We'll assign chapters from New Ideas from Dead Economists next class, and that will take place the following Friday/Tuesday class periods.

Two small groups cycles remain. Get to one in each group. The next small group cycles go like this:
Wednesday 5/10 (B), Friday 5/12 (C), Tuesday 5/16 (A) - Globalization prep, any catch-up
Thursday 5/18 (B), Monday 5/22 (C) Wednesday 5/24 (A) - Review for test, help with take-home problems

Remaining blog entries are posted. If you need to make up any entries, you can use the "Naked Economics - Extra Blog Entries" questions. I'll give a maximum of 4 out of 5, but you can do as many as you need to fill in gaps currently marked "0." EVERYONE can do up one question off that list for 5 points extra credit as well.

GLOBALIZATION: Our look at globalization begins today. Many people argue that this force of integration will come to characterize this era as much as the Cold War had dominated the previous era. Author Thomas Friedman argues that the "Web" has replaced the "Wall" as the symbol of the era.

What is globalization? Simply put, this is the increasing integration of the world through the forces of global trade, business, and finance.

Thomas Friedman's book, The Lexus and the Olive Tree: Understanding Globalization, has become the most widely-cited book on the topic. (Yes, his recent work, The World is Flat is also being widely cited...) He has a number of very useful metaphors and explanations. You'll be asked to read one of the chapters for Thursday.

A couple of Friedman's ideas:

The Title: The "Lexus" represents the forces of modernity and technology. It is the "drive for sustenance, improvement, prosperity, and modernization." The "Olive Tree" represents "everything that roots us, anchors us, identifies us, and locates us in the world... a family, community, tribe, nation, religion, or home."

There are three balances in the global system:

* Balance between nation-states: The United States has clearly emerged as the sole superpower.

* Balance between nations-states and global markets: Friedman calls the global market of investors the "Electronic Herd". They trade in the global financial centers he calls "Supermarkets".

* Balance between individuals and nation-states: The emergence of people that he calls "Super-empowered Individuals" is a new factor to consider. Some are very angry, others are wonderful.

The "Walls" come down... Friedman argues that the Cold War era gave way to the era of globalization as a result of three fundamental changes.

* Democratization of Technology: caused by advances in miniturization, computerization, digitization, etc. (Computer power has doubled roughly every eighteen months over the past thirty years.)

* Democratization of Finance: caused by computerization, investment technologies, access to financial markets, etc.

* Democratization of Information: spread through things like the Internet, satellite dishes, and television

Globalization Forum: Next Monday, we will come together for the Third Annual Mounds Park Academy Globalization Forum. Each of you will represent a different interest.

* You are allowed (within limits) to select your role for this forum. I do need certain perspectives represented, but you can take creative liberties within those limits.

We will need:

7 American representatives: 1 from government, 1 from "big" business, 1 consumer, 1 environmental activist, 1 worker whose job has been "outsourced", political candidate, Thomas Friedman

3 Europeans: 1 owner of a multinational corporation, 1 worker "displaced" by foreign competition, 1 wealthy investor

3 Africans: 1 resident of a resource-rich country, 1 person existing on less than $1 a day, leader of poor nation that exports coffee

6 Asians: 1 "sweatshop" laborer, 1 high-tech manufacturer, 1 peasant, 1 Chinese governmental official, 1 Indian service-industry worker, 1 recent migrant to Shanghai from Chinese countryside

3 Latin Americans: 1 manager of a foreign-owned factory, 1 manual laborer, 1 illegal immigrant to United States

3 Middle Easterners: 1 leader of oil-rich nation, 1 young woman, 1 Islamic fundamentalist

* You will be expected to provide an introductory statement of not less than ninety seconds. In this statement, you will tell other participants of your "situation", and you will offer your preliminary comments on events associated with globalization.

Obviously, you will need to "create" much of your own detail. Think about how your life has changed over the past decade. What are the advantages/ drawbacks of globalization in your world? What will the future hold?

* In order to help me know who is "who", I'd like you to prepare a "nametag" for our use. Give yourself a name and brief "title" or description. Make them big enough for us to read.

For example: "Adam Wilson - owner of Dell Computers" or whatever...

* Do whatever research in class that might help you create your "perspective" and better understand the issue of globalization.

Here are some resources that you might consult:

Think Global: Public Radio Collaboration 2005 This is a brand new site. There's a lot of good stuff here.

The Lexus and the Olive Tree There are some excerpts and reviews here that you might find interesting.

Globalization: Threat or Opportunity? This is an IMF report addresses many of the central issues in globalization.

The International Forum on Globalization This is the site of a group critical of many of the effects of globalization.

The World is Flat: A Brief History of the Twenty-First Century This is a talk by Thomas Friedman about his most recent book.

Globalization and Its Discontents - Joseph Stiglitz (He won a Nobel Prize for Economics...)

In Defense of Globalization - Professor Jagdish Bhagwati

Other than globalization, this will be our final "topic" for the year. Friday, we'll begin setting up for our "MPA Globalization Forum 2.0" and our "Dead Economists' Luncheon." That, and a quick test, will finish up the year...

I'll post questions for the chapter you were asked to read. I'll try to do the last two over the weekend as well for those of you that would like to finish stuff up a little early...

REMEMBER: Please come Friday if possible as we'll draw for roles and assign chapters from "Naked Economics" to you. It's a shorter "block" due to assembly schedule, but we can get it done.

Development Economics: This will be more discussion oriented than "lecture" based. You know a lot about inequality and the problems of poverty and related issues. For us, I'd like the bigger questions to be these:

What CAN be done to foster economic development?
What SHOULD be done to foster economic development?

First, I'd like to brainstorm a list of causes of global inequality and poverty.

There are a few terms and concepts that will be useful in this discussion:

World Bank: The World Bank is owned by 184 countries. In 2002, almost $20 billion in loans were provided to clients in more than 100 countries. The World Bank's focus is on development assistance.

Work your way through this overview of the World Bank's functions at "10 Things You Never Knew about the World Bank."

Here are the "Quick Reference Tables" from the World Bank. You can find a lot of information here.

International Monetary Fund: According to its own web page, the IMF "works for global prosperity by promoting the balanced expansion of world trade and stability of exchange rates..." Its functions complement those of the World Bank.

Structural Adjustment Programs (SAP): The IMF and World Bank at times require nations to "adjust" their economies in order to assure debt repayment. Many critics believe this only deepens the poverty of the people. Nations may be required to encourage foreign trade, shift to a cash crop focus, or otherwise be directed to act in a particular way. These are also referred to as "economic austerity" plans.

Please have Chapter 9, "Keping Score," from Naked Economics read for Wednesday's class.

Last time it was trade. This time it's money. More specifically, we'll look at international currencies and the role they play in the world's economy. Here are some definitions that you will need to understand:

Exchange Rates: The value of currencies worldwide is provided by exchange rates, which tell you what each currency is worth in relation to other currencies. In simple terms, a currency is worth what people will pay for it. Exchange rates are constantly adjusted to reflect markets.

* Fixed exchange rates: After the 1930s, most countries abandoned the gold standard. Instead, each country's government "fixed" the value of their currency, deciding what it would be worth. (For example, the British decided to exchange their pound into US dollars at a rate of $2.40 per pound.)

* Floating exchange rates: After 1973, international agreements on fixed rates expired, and currencies began to have their value decided in the market. A currency's value will "float" up or down. (An estimated $1.5 trillion dollars in currencies are traded every day in the world's foregin exchange markets.)

Purchasing Power refers to what money can actually buy in each country- calculating its purchasing "power". Purchasing Power Parity (PPP) would be when a currency can buy the same basket of whatever in any country.

"Burgernomics" is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country." (The Economist) In this case, the "basket" is simply a BigMac.

Playing with "Purchasing Power Parity (PPP): I think you'll like this stuff...

To do the following, you need a copy of "cross currency" rates. You can get one from the Benchmark Currency Rates page at Bloomberg.com. (Yes, that's the same Bloomberg as in the Mayor of New York City.)

Economists refer to purchasing power parity to describe why, over time, the dollar price of a good in one country should equal its dollar price in all other countries. The notion that a particular type of cordless telephone should sell for the same dollar price in the United States as it does in, say, Japan and Great Britain, makes sense if you think about supply and demand in world markets. Suppose that the telephone sells for $29.99 in the United States, 2500 yen in Japan, and 25 pounds in Great Britain.

Let's figure out in which country the dollar price of the cordless phone is lowest?

1. What is the exchange rate between the Japanese yen and the United States dollar?

2. What is the exchange rate between the British pound and the United States dollar?

3. Calculate the dollar price of the cordless phone in Great Britain.

4. Calculate the dollar price of the cordless phone in Japan.

5. In which country is the dollar price of the cordless phone the lowest?

6. In which country is the dollar price of the cordless phone the highest?

So, what does "purchasing power parity" suggest that an entrepreneur could do to earn profits?

Of course, purchasing power parity theory suggests that price adjustment will continue until the dollar price of cordless phones is the same in each country. This price equalization is an example of purchasing power parity. Note that it works best for close substitutes that can be traded among countries over long periods of time.

The "BigMac" Index: I did this exact same activity eighteen years ago in high school economics, but I didn't have a fancy laptop to make it easier... The Economist attempts to compare various currencies by using the "Big Mac" as the basis for consideration. The easiest way to make sense of this is to actually read their article and try the activity.

"Food for Thought": The Economist, May 27, 2004

This is, I believe, still their most recent full version of "Burgernomics". (Here is a snapshot of December 2004 data.) You need to read through the article to get a feel for how the concept works. After that, we can try a couple things. (I am bummed. They've removed data, so we can't do the computations ourselves. Ahh, progress.)

Here's another recent effort: The Starbucks index -Burgers or beans? The Economist, January 15, 2004

Coca-Cola map: If you liked the BigMac stuff, here is another one. Read the short article and examine the charts. What conclusions can you draw?

Foreign Exchange map: This is another service from The Economist. Once you get to the page, you have to "Launch the Map". Give it a minute or so to load itself. After that, follow the directions from the first page. Try several comparisons between countries and over time periods.