AP Macroeconomics Unit 7: Balance of Payments

The Balance of Payments

o   A nation’s balance of payments is the measure of money inflows and outflows between the U.S. and the rest of the world.

inflows: credits outflows:debits

• BOP is divided into 3 separate accounts: Current, Capital, Official Resserves

o   Three Components

 The Current Account

·         The current account summarizes U.S. trade in currently produced goods and services

·         US Exports have a plus (+) sign – they creditand create revenue

·         US Imports have a minus (-) sign – they aredebit and reduce the stock of foreign currencies in the United States

·         Balance on Goods

o   A country’s balance of trade on goods is the difference between its exports and its imports of goods

·         Balance on Services

o   Services include insurance, consulting, travel, and brokerage services

·         Balance on Goods & Services

o   The difference between U.S. exports of goods and services and U.S. imports of goods and services

§  Trade deficit – imports > exports

§  Trade surplus – exports > imports

·         Balance on Current Account

o   Represents the net investment income, represents the difference between

§  1. The interest and dividend payments foreigners paid the United States for the use of exported U.S. capital

§  2. The interest and dividends the United States paid for the use of foreign capital invested in the United States

o   Includes Net transfers and Net investment Income

§  Net Transfers include foreign aid, pensions paid to U.S. citizens living abroad, and remittances by immigrants to relatives abroad

·         “The exporting of goodwill and the importing of ‘thank-you notes’.”

o   By adding all transactions in the current account, obtain the balance on current account

§  The Capital Account

·         The capital account summarizes the purchase or sale of real or financial assets and the corresponding flows of monetary payments that accompany them.

o   Items (an office building or bonds) bought from the U.S. count as exports (+) as they represent in--payments of foreign currencies

§  Key Point – foreign purchases of assets in the U.S.

o   Items located in foreign countries and sold to companies in that country count as imports (-) as they represent out-payments of domestic currencies

§  Key Point- U.S. purchases of assets abroad

·         Exports and Imports balance on the balance on capital account

§  The Official Reserves Account

·         The central banks of nations hold quantities of foreign currencies called official reserves.

·         Functions just the same as reserves in any other bank

·         Basically used to make up any final balancing amount

§  The three components of the balance of payments (the current account, the capital account, and the official reserves account) must together equal zero.

§  Every unit of foreign exchange used (as reflected in a minus out-payment or debit transaction) must have source (a plus in-payment or credit transaction)

o   Payments Deficits and Surpluses

§  Balance-of-payments deficits and surpluses, though the balance of payments must always sum to zero, this refers to imbalances between the current and capital accounts

·         The US favors balance-of-payments deficits – a drawing down of official reserves

·         A balance-of-payments surplus is a building up of official reserves

A BOB "Chart"

	Assets/Creditr (Inflow)	Debits/Liabilities (Outflow)
Current Account
-Balance on goods and services -Net exports -Balance of trade	-Exports -Tourism here	-Imports -Tourism there
Net Investments	-Interest/dividend payments -Foreign ppay to U.S. for use of exported capital	-Interest/dividend payments -The U.S. made for the use foreign capital invested in U.S.
Net Transfers	-Aid to U.S. -Include royalties	-Aid to their country -Their royalties
Financial Account	-Capital inflows -Direct investment by foreigners -Purchases of stocks and bonds by foreigners	-Capital ooutflows -Direct investment by U.S. over there -Purchases of stocks and bonds by U.S.
Official Reserves	-Currencies -Gold -IMF	-Currencies -Gold -IMF

Comparative and Absolute Advantage

• The division of labor into specific task and roles intended to increase the productivity of workers is called known specialization
• Globalization is the process of increasing the productivity and interdependence of the world's markets and businesses
• Absolute advantage refers to a country's ability to produce a certain more of a good or service than another country
• The absolute advantage rule states that two countries should specialize and trade when each other partner has an output advantage over the other
• Comparative advantage refers to a country's ability to produce a particular good with a lower opportunity cost than another country
• Gains from trade or based on comparative advantage, not absolute advantage
• Comparative advantage is the basis for all trade between individuals, regions, and nations

The Foreign Exchange Market

• A foreign exchange market is a market in which currencies are exchanged for one another
• The equilibrium prices in these markets are called exchange rates
• The rate at which the currency of one nation can be exchanged for the currency of another nation
• Depreciation and Appreciation: an increase in the U.S. demand for Japanese goods will increase the demand for yen and raise the dollar price of yen

Supply of the Dollar	Demand of the Dollar
-Comes from U.S. citizens, banks, and industries wanting to purchase foreign goods, investments assets and to make payments to transfer foreigners	-Comes from foreigners, banks, and industries wanting to purchase our goods, investments, assets, and to make transferred payments to U.S.

• 5 Determinants of Supply and Demand in Foreign Exchange Market

1. Change in buyers taste
2. Change in relative incomes
3. Change in relative prices
4. Change in interest rates
5. Change in expectations

Exchange Currencies

• Sell exports and buy imports
• Invest in a countries stocks and bonds
• Build stores and factories in other markets
• Hold currencies in bank accounts for future exports, imports, and business loans 
• To speculate on currency values

AP Psychology Unit 6

Unit 6

Memory
The persistence of learning over time through the storage and retrieval of information

Memory Process

1. Encoding: the processing of information into the memory 
2. Storage: the retention of encoded material over time
3. Retrieval: the process of getting the information of memory storage

Recall vs. Recognition

• With recall you must retrieve the information from your memory (fill-in-the blank test)
• With recognition you must identify the target from possible targets (multiple choice test)

Flashbulb Memory

• A clear moment of an emotionally significant moment or event

3 Types of Memory
Sensory Memory

• The immediate, initial recording of sensory information in the memory system 
• Store just for an instant, and most gets unprocessed

Short-term Memory

• Memory that holds a few items briefly
• Seven digits
• The information will be stored into long-term of forgotten

Working Memory (Modern Day STM)

• Another way of describing the use to short-term memory is called working memory
• Has three parts: 

1. Audio
2. Visual
3. Integration of audio and visual

Long-term Memory 

• The relatively permanent and limited storehouse of the memory system

Encoding
Automatic Processing

• Unconscious encoding of incidental information
• You encode space, time and word meaning without effect
• Things can become automatic with practice

Effortful Processing

• Encoding that requires attention and conscious effort
• Rehearsal is the most common effortful processing technique
• Through enough rehearsal, what was effortful becomes automatic

The Next-in-line Effect

• We seldom remember what the person has just said or done if we are next

Spacing Effect

• We encode better when we study or practice over time 

Serial Positioning Effect 

• Our tendency to recall best the last and first items in a list

Three Types of Encoding

1. Semantic: the encoding of meaning, like the meaning of words
2. Acoustic: the encoding of sound, especially the sounds of words
3. Visual: the encoding of picture images

Chuncking

• The organizing items into familiar, manageable units
• Often it will occur automatically

Token Economy

• Every time a desires behavior is performed a token is given
• They can trade tokens in for a variety of prizes 
• Used in homes, prisons, mental institutions, and schools

Fixed Interval

• Requires a set of amount of time to elapse before giving the reinforcement

Variable Interval

• Requires a random amount of time to elapse before giving the reinforcement

Observational Learning 

• Albert Bandura and Bobo Doll 
• We learn through modeling behavior from others 
• Observational learning plus operant conditioning equals social learning theory

Latent Learning 

• Sometimes learning is not immediately evident

Insight Learning 

• Some animals through the "ah ha" experience

Reinforcement 

• Reduce or decrease a desired behavior 

Punishment 

• Used to decrease an unwanted behavior

Types of Long Term Memory
Explicit (declarative) with conscious recall

• Facts, general knowledge (semantic memory)
• Personally experienced events (episodic memory)

Implicit (nondeclarative) with conscious recall

• Skills, motor and cognitive
• Classical and operate conditioning effect

Types of Retrieval Failure 

1. Proactive Interference: the disruptive effect f prior learning on the recall of new information
2. Retroactive Interference: the disruptive effect of new learning on the recall of old information

Misinformation Effect

• Incorporating misleading information into ones memory of an event

Learning 

Associative Learning

• Learning that certain events occur together

Classical Conditioning

• Ivan Pavlov, tested theory on dogs

Unconditional Stimulus (UCS)

• A stimulus that naturally and automatically triggers response

Unconditioned Response (UCR) 

• The unleamed, naturally occurring response the UCS

Conditioned Stimulus (CS)

• An originally irrelevant stimulus, that, after association with the UCS, comes to trigger response

Conditioned response (CR)

• The learned response to a previously neutral stimulus

Acquisition

• The phase where the neutral stimulus is associated with the UCS so that the neutral stimulus comes to elicit the CR

Extinction

• The diminishing of a conditional response 
• Will eventually happen when the UCS does not follow the CS

Spontaneous Recovery 

• The reappearance, after a rest period of an extinguished conditioned response 

Generalization

• The tendency, once a response has been conditioned, for stimuli similar to the CS to elicit similar response

Discrimination

• The ability to distinguish between a CS and other stimuli that does not signal UCS 

Operant Conditioning 

• The learner is not passive
• Learning based on consequences 
• A type of learning in which behavior sis strengthened if followed by reinforcement or diminished if followed by punishment 

Classical vs. Operant 

• They both use acquisition, discrimination, SR, generalization and extinction
• Classical conditioning is automatic
• Operant conditioning involves behavior where one can influence their environment with behaviors which have consequences 

Law of Efferent by Edward Thorndike

• rewarded behavior is likely to reoccur

B.F. Skinner

• Shaping: a procedure in operant conditioning in which reinforcers guide behavior closer and closer towards a foal

Reinforcers

• Any event that strengthens the behavior it follows
• Two types of reinforcement

1. Positive
2. Negative

Positive Reinforcement 

• Strengthens a response by presenting a stimulus after a response

Negative Reinforcement

• Strengthens a response by reducing or removing an aversive stimulus

Types of Reinforcers

Primary Reinforcers

• An innately reinforcing stimulus 

Conditioned (Secondary) Reinforcer

• A stimulus that gains its reinforcing power through its association within its primary reinforcement

Punishment 

• An event that decreases the behavior that it follows

Reinforcement Schedules 

Continuous Reinforcement 

• Reinforcing the desired response every time it occurs

Partial Reinforcement 

• Reinforcing a response only part of the time 
• The acquisition process is slower
• Greater resistance to extinction 

Fixed Ratio Schedule

• A schedule that reinforces a response only after a specified number of responses

Variable Ratio Schedule 

• A schedule of reinforcement that reinforces a response after an unpredictable number of responses

Fixed Interval

• A schedule of reinforcement that reinforces a response only after a specified time as elapsed

 Variable Interval Schedule 

• A schedule of reinforcement that reinforces a response at unpredictable intervals

Sleep

• State of unconscious 
• We are less aware of our surroundings 

Conscious, Subconscious, Unconscious

Daydream

• They can help us prepare for future events
• They can nourish our social development 
• Can substitute for impulsive behavior 

Fantasy Prone Personalities

• Someone who imagines and recalls experiences with life like vividness and who spends considerable time fantasizing 

Biological Rhythms 

• Annual cycle: seasonal variation (bear hibernation)
• 28 Day cycle: sleep cycle
• 24 Hour cycle: our circulation rhythm 
• 90 Minute cycle: sleep cycle

Circadian Rhythm 

• Biological clock
• Our body temperature and awareness changes throughout the day

Sleep Stage 

• There are 5 identified stages
• It takes about 90-100 minutes to pass through the five stages
• The brain's waves will change according to the sleep stage you are in
• The first four stages are known as NREM sleep
• The 5th stage is called REM sleep

First Stage

• Kind of awake and kind of asleep 
• Only last a few minutes, and you usually only experience it once a night
• Eyes begin produces theta waves

Second Stage

• This follows stage one of sleep and is the "baseline" of sleep
• This stage is part of the 90 minute cycle and occupies approximately 45-60 % of sleep
• More theta waves that progressively slower 

Stage Three and Four

• Slow wave sleep
• You produce delta waves
• If awoken you will be very groggy
• Vital for restoring body's growth hormones and overall health 
• May last 15-30
• It is called "slow wave" sleep because brain activity slows down dramatically from the "theta" rhythm of stage two to a much slower rhythm called "delta" and the height or amplitude of the waves increases dramatically 
• Contrary to popular belief, it is delta sleep that is the "deepest" stage of sleep and the most restorative
• It is delta sleep that asleep-deprives person's brain craves the first and foremost

REM Sleep

• Rapid eye movement
• Brain is very active 
• Dreams occur
• Body is essentially paralyzed
• 20-25 % of normal nights sleep
• Breathing, heart rate, and brain wave activity quickens
• Vivid dreams can occur
• From REM, you back to stage two

Insomnia 

• Persistent problems falling asleep
• Affects 10% of the population

Narcolepsy

• Suffer from sleeplessness and may fall asleep at unpredictable or inappropriate times
• Directly into REM sleep
• Less than .001% of population

Sleep Apnea

• Wake up momentarily, gasps for air, the  falls back asleep
• Very common, especially in heavy males
• Can be fatal

Night Terrors

• A sleep disorder characterized by high arousal and an appearance of being terrified
• Occurs in stage four, not REM, are not often remembered

Sleep Walking

• Sleep disorder affecting an estimated 10 percent of all humans at least once in their lives
• Most often occurs during deep non-REM sleep (stage 3 or stage 4 sleep) early in the night

Dreams 

• A sequence of images, emotions, and thoughts passing through a sleeping person's mind
• Manifest Content: the remembered story line of a dream
• Latent Content: the underlying meaning of a dream 

Three Theories 
Freud's Wish-Fulfillment Theory

• Dreams are the key to understanding our inner conflict
• Ideas and thoughts that are hidden in our unconscious 
• Manifest and latent content

Information Processing Theory 

• Dreams act to sort out and understand the memories that you experience that day 
• REM sleep does increase after stressful events

Activation-Synthesis Theory

• During the night out brain stem releases random neural activity, dreams may be a way to make sense of that activity

Monetary Policy Video

Unit 4 Psychology

The Nervous System

• It starts with an individual nerve cell called a Neuron.

How does a Neuron Fire?

• Resting Potential: Slightly negative charge; reaches the threshold when there enough of a transmitter reaches. 

• Dendrites: Go to Action Firing. 

The All or None Response: The idea that either the neuron fires or it does not- no part way firing.

• Like a gun

Steps of Action Potential

• Neurotransmitters: Chemical messengers that are released by terminal buttons through the synapse

4 Types:

Acetylcholine (ACH)

- Deals with motor movement and memory

- Lack of ACH has been linked to Alzheimer’s disease

Dopamine

- Deals with motor movement and alertness

- Lack of Dopamine has been linked to Parkinson’s disease

- Too much has been linked to Schizophrenia 

Serotonin

- Involved in mood control

- Lack of Serotonin  has been linked to clinical depression 

Endorphins

- Involved in pain control 

- Many of our addictive drugs deals with Endorphins. 

Drugs can be:

• Agonist- Make Neuron Fire

• Antagonist- Stop Neural Firing 

• Reuptake Inhibitors- Block neurotransmitters from entering the Neuron

Norepinephrine

- Helps control alertness and arousal

- An undersupply can lead to depression

- An oversupply can lead to manic symptoms 

GABA (Gamma- Aminobutytic Acid)

- Major inhibitory neurotransmitter

- An undersupply can lead to tremors, seizures, and insomnia

Glutamate

- Major excitatory neurotransmitter

- Involved in memory

- An oversupply can overstimulate the brain, leading to migraines (this is why people avoid food with MSG in it)

Types of Neurons 

Afferent Neurons

Sensory Neurons: Take information from the senses to the brain

Inter Neurons: Take messages form Sensory Neurons to other parts of the brain or to Motor Neurons

Efferent Neurons

Motor Neurons: Take information from brain to the rest of the body

Neuro Anatomy

• Synapse: Apace in between; Neurons do not touch each other 

• Neurotransmitters: Chemicals held in the terminal buttons that travel through synaptic gap

• Dendrites: Receive messages from other cells

• Axon: Passes messages away from the cell body to other neurons or muscles

• Neural Impulse: Electrical signal traveling down the axon 

• Myelin Sheath: Covers the axon, where neural impulse travels

• Terminal branches of Axon: form junctions with other cells

• Cell body: the cell’s life, support center

The Nervous System

Central Nervous System

• Consists of Brain and Spinal Cord

Peripheral Nervous System 

• All nerves that are not encase in bone

• Everything but the Brain and Spinal Cord

• Divided into two: Somatic and Autonomic

Somatic:

- Controls voluntary muscle movements

- Uses motor (Efferent) Neuron

Autonomic:

- Controls the automatic functions of the body

- Divided into two categories: Sympathetic or Parasympathetic 

• Sympathetic:

- Fight or Flight Response

- Automatically accelerate heart rate, breathing, dilates pupils, slow down digestion 

• Parasympathetic:

- Automatically slows the body down after a stressful events

- Heart rate and breathing slow down, pupils constrict and digestion speeds up

Reflexes

• Normally, sensory (Afferent) neurons take information up through the spine to the brain

• Some reactions occur when sensory neurons reach just the spinal chord

The Endocrine System: The Major Endocrine Glands

• A system of glands that secrete hormones

• Similar to nervous system, except hormones work a lot slower than neurotransmitters

Way We Study the Brain

Accidents

• Phineas Gage Story

• Personality changed after the accident

Lesions

• Removal of destruction of some part pf the brain

• Frontal Lobotomy

Electro Encephalogram

• EEG

• Detects brain waves through their electrical output

• Used mainly in sleep research

Computerized Axial Tomography 

• CAT scan 

• 3D x-ray of the brain

• Tumor locating, but nothing about the function

Magnetic Resonance Imaging

• MRI

• More detailed picture of brain using magnetic field to knock electrons off axis

• Like a movie production

Position Emission Tomography

• PET scan

• Measures how much of a chemical the brain is using (usually glucose consumption)

Brain Structures:

1. Hindbrain

2. Midbrain

3. Forebrain

Hindbrain

• Structures on top of our spinal chord

• Control basic biological structure

Medulla Oblongata

- Located just above the spinal chord

- Controls:

• Heart rate

• Blood pressure

• Breathing

Pons

- Located just above the Medulla 

- Connects Hindbrain with Midbrain and Forebrain

- Involved in expressions

Cerebellum

- Bottom rear of the brain

- Means “Little Brain”

- Coordinates fine muscle movements

Midbrain

• Coordinates simple movements with sensory information

• Most important structures in Midbrain is the Reticular Formation (Reticular Activating System) controls arousal and ability to focus our attention

• If broken… sleep

Forebrain

• Makes us human

• Largest part of the brain

• Made up of the Thalamus, Limbic System and Cerebral Cortex

Thalamus

- Switchboard of the brain 

- Receives sensory signals from the spinal cord and sends them to other parts of the Forebrain 

- Every sense except smell

Limbic System 

- Hypothalamus, Hippocampus, Amygdala

• Hypothalamus

- Maybe most important structure in the brain 

- Controls: 

Body Temperature

Sexual Arousal

Hunger

Thirst

Endocrine System

• Hippocampus

-  Involved in the processing and storage of memories 

• Amygdala

- Involved in how we process memory

- More involved in volatile emotions like anger

The Cerebral Cortex is made up of four lobes

·         Frontal Lobes

-          Abstract thought and emotional control.

-          Contains the Motor Cortex: Sends signals to our body controlling muscle movements.

-          Contains Broca’s Area: Responsible for controlling muscles that produce speech.

-          Damage to Broca’s Area is called Broca’s Aphasia: Unable to make movements to talk.

·         Motor and Sensory Cortexes

·         Parietal Lobes

-          Contains Sensory Cortex: Receives incoming touch sensations from the rest of the body.

-          Most of the Parietal Lobes are made up of Association Areas.

-          Association Area: Any area not associated with receiving sensory information or coordinating muscle movements.

·         Occipital Lobe

-          Deals with vision

-          Contains Vision Cortex: Interprets messages from our eyes into images we can understand.

·         Temporal Lobes

-          Process sound sensed by our ears.

-          Interpreted in Auditory Cortex.

-          NOT LATERALIZED

-          Contains Wernicke’s Area: Interprets written and spoken speech.

-          Wernicke’s Aphasia: Unable to understand language; the syntax and grammar is jumbled.

-          Specialization and integration in language

·         Corpus Callosum: Connects right and left hemispheres. 





Developmental Psychology

• The study of you from womb to the tomb 
• How we change physically, socially, cognitively and morally

Nature vs. Nurture

• Nurture: the way you were raised
• Nature: the way you were born

Prenatal Development

• Conception begins with the drop of an egg and the release of about 200 million sperm
• The sperm seeks out the egg and attempts to penetrate the eggs surface

Zygote

• The first stage of prenatal development, last about two weeks and consists of rapid cell division
• Sperm penetrates egg, it is now fertilized
• Less than half of all zygotes survive first two weeks
• About 10 days after conception, the zygote will attach itself to the uterine wall 
• The outer part of the zygote becomes the placenta (nutrients)

Embryo

• Two weeks later 
• Last about 6 weeks
• Heart begins to beat and the organs begin to develop

Fetus

• By nine weeks we have a fetus
• The fetus by about the 6th month, the stomach and other organs have formed enough to survive outside of mother
• At this time the baby can hear (and recognize) sounds and respond to light

Teratogens

• Chemical agents that can harm the prenatal environment
• Alcohol
• Other STD's can have the baby
• HIV
• Herpes

Healthy Newborns

• Turn head towards voices
• See 8 to 12 inches from their faces 
• Gaze longer at human like objects right from birth

Reflexes

• Inborn automatic responses
• Rooting reflexes: babies tendency when touched on the cheek to open mouth and search for nipple
• Sucking 
• Grasping 
• Moro
• Babinski

Maturation

• Physical growth, regardless of the environment
• Although the timing

Puberty

• The period of sexual maturation, during which a person becomes capable of reproducing

Primary Sexual Characteristics

• Body structures that make reproduction possible

Secondary Sexual Characteristics

• Non-reproductive sexual characteristics

Landmarks for Puberty

• Menarche for girls
• First ejaculation for boys (spermarche)

Physical Milestones

• Menopause: when a woman stops menstruation

Death

• Elizabeth Kubler-Ross
• Stages of Death/Grief

1. Denial
2. Anger 
3. Bargaining
4. Depression
5. Acceptance

Social Development 

• Stranger anxiety: when an infant encounters a stranger and exhibit anxiety
• Separation anxiety: when a child is separated from their parents

Attachment

• Harry Harlow and his monkeys
• Harry showed that monkeys needed touch to form attachment 
• Critical periods: the optimal period shortly after birth when organism's exposure to certain stimuli or experiences produce proper development
• Those who are deprived of touch have trouble forming attachment when they are older

Mary Ainsworth's strange situation
Types of Attachment

1. Secure
2. Avoidant
3. Ancious/Ambivalent

Parenting Styles

1. Authoritarian (parent in control)
2. Permissive Parents (child in control)
3. Authoritative Parents (both child and parent)

Erik Erikson-Social Development

• A neon-Freudin
• Worked with Anna Freud
• Thought our personality was influenced by our experiences with others

Trust vs. Mistrust

• Can a baby trust you 
• The trust or mistrust they develop can carry on with the child

Autonomy vs. Shame&Doubt

• Babies control bodies (toilet)
• Control temper tantrums
• Big word is "No"

Initiative vs. Guilt 

• Word "No" turns to "Why?"
• Are they good or bad
• Ages 3-6
• Want to understand the world and ask questions

Industry vs. Inferiority

• Ages 6-12
• School begins
• Can lead  to us feeling bad about ourselves for the rest of our lives (Inferiority Complex)
• Feel good or bad about accomplishments

Identity vs. Role Confusion

• Ages 13-15
• Who am I
• Try different things

Intimacy vs. Isolation

• Have to balance work and relationships
• Prioritize

Generality vs. Stagnation

• Middle adult 
• Will I succeed in life 
• Mid-life crisis

Integrity vs. Despair 

• Look back on life 
• Senior
• Was my life meaningful or do I regret it?

Jean Piaget

Cognitive Development

• It was thought that kids were just stupid versions of adults
• Kids learn differently from adults 

Schema

• Children view the world through schemes (as do adults for the most part)
• Schemes are ways we interpret the world around us
• It is basically what you picture in your head when you think of anything

Assimilation 

• Incorporating new experiences into existing schemas

Accommodation

• Changing an existing schema to adopt to new information

Stages of Cognitive Development

1. Sensorimotor Stage

• Experience the world through our senses
• Do not have object permanence
• Ages 0-2

2. Preoperational Stage

• Ages 2-7
• Have object permanence
• Begin to use language to represent objects and ideas
• Egocentric: cannot look at the world through anyone's eyes but their own 
• Conservation: refers to the idea that a quantity remains the same despite changes in appearance and is part of logical thinking

3. Concrete Operational Stage

• Can demonstrate concept of conservation 
• Learn to think logically 

4. Formal Operational Stage

• Abstract reasoning 
• Manipulate objects in our minds without seeing them
• Hypothesis testing
• Trial and error 
• Meta cognition
• Not every adult gets to this stage

Types of Intelligence

Crystallized

• Accumilated knowledge
• Increases with age

Fluid

• Ability to solve problems and quickly think abstractly 
• Peaks in 20's and then decreases over time