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