Psychology Unit IV: Neuron Diagram

NEURON DIAGRAM

Synapse

• space in small gap at the end of a neuron that allows information to pass from one neuron to the next
• makes the neurons not touch

Neurotransmitters 

• chemicals held in the terminal buttons that travel through the synaptic gap 

Macroeconomics Unit IV: Blog Video Summary

VIDEO SUMMARIES

1. The most primitive type of money to what we use today is commodity money, representative money, and fiat money. People are most familiar with money being a medium of exchange. When money is stored, it is expected to be stable. The longer money is kept in the bank, they less it is worth during inflation. 
2. The price that is paid for money to get it is the interest rate that is incurred when money is borrowed. Demand for money is downward sloping because when the price is high, the quantity demanded is low and vice versa. When the interest rate is low, people have an incentive to borrow more. When the Federal government offers a tax credit to first time home buyers they are increasing the demand for money because more people will borrow from them.
3. An expansionary policy is called "easy" money while a contractionary money policy is called "tight" money. The Fed controls the reserve requirement either as vault cash pr on reserve with a Fed branch. If the Fed wants to increase the money supply, they decrease the reserve requirement, which increases excess reserves. Buying bonds increases money supply.
4. The video goes through a loanable funds market and money market. During a government deficit, the government demands money and the money market graph will show a shift to the right, showing an increase in interest rate. On the loanable funds market graph, there would be an increased demand for loanable funds due to borrowing. Must show that an increase in money demanded is an increase in interest rate, and an increase in demand for loanable funds increases interest rate.
5. Banks create money buy making loans. The money multiplier is found by one divided by reserve requirement. To find total money created, it would be excess reserves multiplied by the money multiplier. The video shows examples on how to find total money created. 
6. Government deficit spending is when the government borrows money from the public. Buying a bond is loaning money to the government, which is like an IOU. The video goes through the labels on each axis and how the money market, loanable funds market, and AD/AS graphs work in various situations. The Fisher Effect is when the interest rate and inflation must be equivalent to one another. 

Macroeconomics Unit IV: Loanable Funds Market

LOANABLE FUNDS MARKET

• market where savers and borrowers exchange funds (QLF) at real rate of interest (r%)
• demand for loanable funds comes from or borrowing households, firms, governments, and foreign sector
• demand is supply of bonds

Demand

• equals borrowing (supplying bonds)
• more borrowing = more demand for loanable funds which is a shift to the right
• less borrowing = less demand for loanable funds which is a shift to the left
• ex: government deficit spending = more borrowing which is a shift to the right and r% will increase

Supply

• equals savings (demand bonds)
• more savings = more supply of loanable funds which is a shift to the right
• less savings = less supply of loanable funds which is a shift to the left
• ex: government budget surplus = more savings which is a shift to the right and r% will decrease

Final Thoughts

• When government does fiscal policy, it will affect the loanable funds market
• changes in real interest rate will affect Gross Private Investment

Macroeconomics Unit IV: Tools of Monetary Policy

TOOLS OF MONETARY POLICY

Expansionary

• buy bonds which increase money supply, decrease discount rate and reserve requirement

Contractionary

• sell bonds which decrease money supply, increase discount rate and reserve requirement 

Fiscal Policy

• President and Congress
• tax or spend

Monetary Policy

• FED (Federal Reserve Requirement
• open Market Operations
• discount rate
• federal fund rate
• reserve requirements

Discount Rate

• interest rate that the Fed charges commercial banks for borrowing money

Reserve Requirement

• amount of money banks are required to hold
• fraction of money must keep in reserves
• Why is it low? Banks can loan out more money

Federal Fund Rate

• interest rate that commercial banks charge one another for an overnight loan

Prime Rate

• interest rate that banks charge their most credit worthy customer

Macroeconomics Unit IV: Banks

CREATING A BANK

Transaction #4

• depositing reserves in a Federal Reserve Bank

Reserve Ratio 

• (commercial banks required reserve) / (commercial banks checkable deposits - liabilities)

Required Reserves 

• (checkable deposits x reserve ratio) 

Excess Reserves

• (actual reserves - required reserves) 

How Banks Work

Assets

• reserves:
• required reserves (RR): % required by Fed to keep money on hand to meet demand 
• excess reserves (ER): % reserves over and above the amount needed to satisfy the minimum reserve ratio set by the Fed
• loans to firms, consumers, and other banks (earn interest)
• loans to the government = Treasury security
• bank property: if the bank fails, could liquidate the property

Liabilities and Equity

• demand deposits: money put into bank
• timed deposits (CD's) 
• loans from: Federal Reserve and banks
• shareholder's equity: (to set up a bank must invest own money in to to have a stake in the banks success or failure)

Key Principles

• a single bank can create money (through loans) by the amount of excess reserves
• the banking system as a whole can create money by a multiple (deposit or money multiplier) of the initial ER.

Key Information: Initial Deposits

• Cash is existing money, that increases bank reserves, and is not a change in money supply
• Fed purchase of a bond from the public is new money, that increases bank reserves, and is a change in money supply
• Bank purchase of a bond from the public is new money, that increases bank reserves, and is a change in money supply

Factors That Weaken Effectiveness of Deposit Multiplier

1. if a bank fails to loan out all of their ER
2. if bank customers take their loans in cash, rather than in new checking account deposits, it creates a cash or currency drain.

Macroeconomics Unit IV: Money Market

MONEY MARKET

• demand for money has an inverse relationship between nominal interest rates and quanity of money demanded
• downward sloping
  

Macroeconomics: Unit IV: Functions of the FED

FUNCTIONS OF THE FED

1. issues paper money
2. sets reserve requirements and holds reserves of banks
3. lends money to banks and charges then interest
4. check clearing service for banks
5. supervises member banks
6. controls money supply in the economy

Macroeconomics Unit IV: Money

MONEY

Money

• any asset that can be used to purchase any goods or services

Uses

1. medium of exchange: determining value
2. unit of account: comparing accounts
3. store of value: how money can be kept ex. in a bank or box

Types

1. commodity: money that has value in itself ex. salt, olive oil, or gold
2. representative: represents something of value ex. IOU
3. fiat: money because the government says so ex. paper currency or coins

Characteristics of Money

1. durability
2. portability
3. divisibility
4. uniformity
5. limited supply
6. acceptability

Money Supply

• What is money supply? 
• money supply is all available money in the U.S. economy

M1 Money

• liquid assets: can be easily converted into cash
• cash
• currency
• checkable deposits
• demand deposits (checking accounts)
• traveler's check

M2 Money

• M1 Money + savings accounts and money market accounts

Purpose of Financial Institutions

1. store money
2. saving money
3. loan money 

Ways to Save Money

1. savings account
2. checking account
3. money market account
4. certificate of deposit

Loans

• banks operate on a fractional reserve system, which means that they keep a fraction of the funds in a bank and lend out the rest

Interest Rates

• simple interest: paid on the principle
• compound interest: paid on principle and accumulated interest 
• principle interest: amount of money borrowed
• interest: price paid for use of borrowed money

How to Calculate Simple Interest 

• (I) = ((P) x (R) x (T))/ (100)
• P: PRINCIPLE
• T: TIME
• R: INTEREST RATE

Types of Financial Institutions

1. commercial banks
2. savings and loan institutions
3. mutual savings bank
4. credit unions
5. finance companies

Investments

• redirecting resources that we would consume now for future purposes
• financial assets: claims on property and income of borrower
• financial intermediaries: institute that channels funds from savers to borrowers 
• savers → financial institutions  → investors

Purpose of Financial Intermediaries

1. share risk: through diversification (spreading out investments to reduce risk)
2. provide information: get a stockbroker
3. liquidity: returns, money investor receives above and beyond what was initially invested

Bonds

• loans or IOUs that represent debt that the government or corporation must repay to an investor 
• generally low risk investments

Components

1. coupon rate: interest rate that a bond issuer will pay to a bond holder
2. maturity: time at which payment to a bond holder is due
3. par value: amount an investor pays to purchase a bond and that will be repaid to investor at maturity

Time Value of Money

• reason for charging and paying interest: opportunity cost and inflation
• V: future value of money
• P: present value of money
• n: # of years 
• r: real interest rate (nominal-inflation)
• k: # of times interest is charged during year

Simple Interest

• (V) = ((1 + r )^n) x (p)

Compound Interest

• (V) = ( 1 + (r/k)^((n)(k)) x (p)

Psychology: Unit III Emotion

EMOTION

• response of the whole organism
• physiological arousal 
• expressive behaviors
• conscious experience

James - Lange Theory

• experience of emotion in awareness of physiological responses to emotion arousing stimuli

Cannon - Bard Theory

• emotion arousing stimuli simultaneously trigger:
• physiological responses
• subjective experience of emotion

Schachter's Two - Factor Theory

• to experience emotion one must: 
• be physically aroused
• cognitively label the arousal 

Polygraph

• machine commonly used in attempts to detect lies
• measures several of the physiological responses accompanying emotion
• perspiration, cardiovascular, and breathing changes

Amygdala

• a neural key to fear learning

Catharsis

• emotional release
• "releasing" aggressive energy (through actions or fantasy) relieves aggressive urges

Feel - good, do - good Phenomenon

• people's tendency to help when they are already in a good mood

Adaptation - Level - Phenomenon

• tendency to form judgments relative to a "neutral" level
• defined by our prior experience
• brightness of lights
• level of income
• volume of sound

Relative Deprivation

• perception that one is worse off relative to those with whom one compares oneself

Psychology: Unit III Eating Disorders

EATING DISORDERS

Bulimia Nervosa

• characterized by binging (eating large amounts of food) and purging (getting rid of the food) 
  

Anorexia Nervosa

• starve themselves to below 85% of their normal body weight
• see themselves as fat
• majority are women

Obesity

• severely overweight to the point where it causes health issues 
• mostly eating habits, but some people are predisposed towards obesity

Psychology: Unit III Motivation & Emotion

MOTIVATION AND EMOTION

Motivation

• psychological process that directs and maintains your behavior towards a goal

Motives

• propel or drive people in certain directions 
• instinct theory: we are motivated by our inborn automated behaviors

Biological Motives

• hunger, thirst, sex, and sleep

Social Motives

• achievement, play, autonomy, order, and affiliation

Drive Reducing Theory

• biological internal motivation
• homeostasis

Incentive Theory

• environmental motivation
• no homeostasis

Drive Reducing Theory

• need for food, leads to hunger, which leads to a person eating

Biological Basis for hunger

• hunger does not come from stomach
• hunger comes from the brain (hypothalamus)

Why hungry?

• Glucose: form of sugar that circulates in the blood and provides major source of energy for body tissues 
• low glucose means you are hunger and high glucose means you are full

Body Chemistry

• Glucose is the hormone insulin converts glucose to fat

Lateral Hypothalamus

• when stimulated it makes you hungry
• when lesioned (destroyed) you won't be hungry

Ventromedial Hypothalamus

• when stimulated you feel full
• when lesioned you won't feel full again

Hunger Environment Factors

1. availability of food
2. learned preferences and habits
3. stress

Set Point Theory

• Hypothalamus acts like a thermostat
• wants to maintain a stable weight
• activate Lateral Hypothalamus when you diet and activate the Ventromedial Hypothalamus when you start to gain weight

Psychology: Unit III Motivation

MOTIVATION

Intrinsic Motivators

• rewards we get internally such as enjoyment or satisfaction

Extrinsic Motivators

• reward that we get for accomplishments from outside ourselves 
• works great in the short run

Over Justification Effect

• promise a reward for doing something you like to do
• results in you seeking the reward as the motivation for performing the task
• tends to diminish intrinsic motivation

Theory X

• manager believes that employees only work if rewarded with benefits or threats of punishment 
• think employees are extrinsically motivated
• only interested in Maslow's lower needs

Theory Y

• managers believe that employees are internally motivated to do good work
• only interested in Maslow's lower needs

When Motives Conflict

1. Approach-Approach (TWO positive outcomes) (only pick ONE)
2. Avoidance-Avoidance (TWO negative outcomes) )only pick ONE)
3. Approach-Avoidance (BOTH positive and negative outcomes)
4. Multiple-Approach-Avoidance (multiple choices/outcomes)

Psychology: Unit III Social Influence

SOCIAL INFLUENCE

Conformity

• adjusting to one's behavior or thinking to coincide with a group standard

What strengthens conformity? (six)

1. one in made to feel incompetent
2. the group is at least three people
3. group is unanimous
4. one admires the group's status
5. one had made no prior commitment
6. the person is observed

Reasons for Conformity

Normative Social Influence

• influence resulting from a person's desire to gain approval or avoid disappointment

Informational Social Influence

• influence resulting from one's willingness to accept other's opinions about reality in the presence

Social Facilitation

• improved performance of tasks in the presence of others
• occurs with simple or well learned tasks
• not with tasks that are difficult or not yet mastered

Yerkes-Dodson Law

• there is an optimal level of arousal for the best performance of any task
• easy tasks (relatively high)
• difficult tasks (low arousal)
• other tasks (moderate level)

Social Loafing

• the tendency for people in a group to exert less effort when pooling efforts toward a common goal than in they were individually accountable

Deindividuation

• loss of self-awareness and self-restraint occurring in group situations that foster arousal and anonymity

Group Polarization

• concept that a group's attitude is one of extremes and rarely moderate

Group-think

• mode of thinking that occurs when the desire for harmony in a decision making group overrides common sense

Self - Fulfilling Prophecies

• occurs when one person's belief about others leads one to act in ways that induce the others to appear to confirm the belief

Psychology: Unit III Social Relationships

SOCIAL RELATIONSHIPS

• how do we relate to others?
• attraction
• altruism
• conflict and prejudice

Prejudice

• unjustifiable attitude towards a group of people
• overt: use flags
• subtle: refuse to touch paper from a person

Stereotype

• generalized belief about a group of people 

Social Inequalities

In group

• "us"
• people with whom we share a common identity

Out group

• "them"
• those perceived as different than one's in group

In group bias

• tendency to favor one's own group

Social Relationships

Scapegoat Theory

• prejudice provides an outlet for anger by providing someone to blame

Aggression

• any physical or verbal behavior intended to hurt or destroy

Biology of Aggression

• genetics
• neural influences (brain)
• biochemical

Psychology of Aggression

• Frustration -  Aggressive Principle: blocking of an attempt to achieve some goal; creates anger which generates aggression

Conflict

• perceived incompatibility of actions, goals, or ideas

Social Trap

• situation where people must choose between an act that is beneficial to themselves, but harmful to others and an act that is moderately beneficial to all

Attraction (five factors)

Proximity

• geographic nearness
• mere exposure effect: repeated exposure to something breeds liking

Reciprocal Liking

• you are more likely to like someone who likes you

Similarity

• similarity breeds content
• bird of the same feather do flock together
• opposites do NOT attract

Liking Through Association

• classical conditioning can play a pert in attraction

Physical Attractiveness

• Passionate Love: an aroused state of intense positive absorption of another
• Compassionate Love: deep affectionate attachment we feel for those with whom our lives are intertwined.

What makes compassionate love work?

• equity: mutual give and take, assets, money, what you put in.
• self - disclosure: open to people, share personal thoughts and feelings

Altruism

• unselfish regard for the welfare of others

Bystander Effect

• bystanders are less willing to help if there are other bystanders around

Social Exchange Theory

• idea that our social behavior is an exchange process, in which we maximize our benefits and minimize costs

Peacemaking

• give people subordinate (shared) goals that can be only achieved through cooperation

GRIT

• Graduated Reciprocated Initiatives in Tension Reduction

Psychology: Unit III Social Psychology

SOCIAL PSYCHOLOGY

• study of how we think about, influence, and relate to one another

Social Thinking

• how do we think about one another?

Attribution Theory

• the idea that we give a casual explanation for someone's behavior
• we credit that behavior either to the situation or to the person's disposition

Fundamental Attribution Error

• the tendency to underestimate the impact of a situation and overestimate the impact of personal disposition

Attitudes

• belief or feeling that predisposes one to respond in a particular way to something
• external pressure is minimal
• we are aware of our attitudes
• attitude is relevant to the behavior

Foot-in-the-door Phenomenon

• tendency for people who have first agreed to a small request to comply later with a larger request

Door-in-the-face Phenomenon

• people who say no to a huge request, to comply with a smaller one

Zimbardo Prison Study

• role playing effects attitudes
• what do you think happened when college students were made to take on the role of prison guards and inmates?

Cognitive Dissonance Theory

• we do like when we have either conflicting attitudes or when our attitudes do nor match our actions
• when they clash, we will change our attitude to create balance

Macroeconomics Unit III: Fiscal Policy

FISCAL POLICY

• changes in the expenditures or tax revenues of the federal government
• two tools: taxes and spending
• taxes: government can increase or decrease taxes
• spending: government can increase or decrease spending

Balanced Budget

• revenues = expenditures

Budget Deficit

• revenue < expenditures

Budget Surplus

• revenue > expenditures 

Government Debt

• (sum of all deficits) - (sum of all surpluses)

Government borrows money from 

• individuals
• corporations
• financial institutions
• foreign entities or foreign governments

Fiscal Policies

Discretionary Policy (action)

• increase or decrease government spending and/or taxes in order to return the economy to full employment
• involves policy makers doing fiscal policy in response to an economy problem

Automatic

• unemployment compensation and marginal taxes that help mitigate the effects of recession and inflation
• taxes placed without policy makers having to respond to current economy problems

Contractionary Policy (surplus)

• decrease AD
• strategy for controlling inflation
• decrease government spending
• increase taxes
• inflation is countered with contractions

Expansionary Policy (deficit)

• increase AD
• increase GDP
• combating a recession and reducing unemployment
• increase government spending
• decrease taxes
• price level increased; some inflation

Automatic or built in stabilizers

• anything that increases the government budget deficit during a recession and increases its budget surplus during inflation without requiring explicit action by policymakers

Transfer Payments

• welfare checks
• food stamps
• unemployment checks
• corporate dividends
• social security
• veteran's benefits

Taxes

taxes reduce the drop in disposable income during recessions and reduces the jump in disposable income during expansions. 

Progressive Income Tax

• automatic stabilizers
• take 33-50% out

Progressive Tax System

• average tax rate = (tax revenue)/(GDP)
• average tax rate rises with GDP 

Proportional Tax System

• average tax rate remains constant as GDP changes

Regressive Tax System

• average tax rate falls with GDP

Macroeconomics Unit III: Savings and Consumption

SAVINGS & CONSUMPTION

Two choices

• with disposable income, households can either...

1. Consume (spend money on goods and services)
2. Save (not spend money on goods and services)

Disposable Income 

• income after taxes or net income
• DI = (gross income- taxes)

Consumption

• household spending

The ability to consume is constrained by

• the amount of disposable income
• propensity to save

Do households consume if DI = 0?

• autonomous consumption
• dis-saving

APC 

• APC = (C/DI) = % DI that is spent

Savings

• households not saving

The ability to save is constrained by

• amount of disposable income
• propensity to consume

Do households save if DI= 0?

• no

APC & APS Equations

• APC + APS = 1
• 1 - APC = APS
• 1 - APS = APC
• APC > 1 dis-saving 
• (- APS) dis-saving 

MPC & MPS

Marginal Propensity to Consume

• Δ C/ Δ DI
• percent of every extra dollar earned that is spent

Marginal Propensity to Save

• Δ S/ Δ DI
• percent of every extra dollar earned that is saved

MPC & MPS Equations

• MPC + MPS = 1
• 1 - MPC = MPS
• 1 - MPS = MPC

Multipliers

Spending Multiplier Effect

• an initial change in spending (C, Ig, G, Xn) causes a larger change in aggregate spending or aggregate demand
• Spending Multiplier = ( Δ in AD) / (Δ in spending C, Ig, G, Xn)

Why does the Spending Multiplier Effect happen?

• expenditures and income flow continuously which sets off a spending increase in the economy 
• can be calculated from MPC or MPS 
• (1)/ (1 - MPC) or (1)/ (MPS)
• Spending Multiplier is positive when there is an increase in spending and negative when there is a decrease

Tax Multiplier

• when government taxes, the multiplier works in reverse because now money is leaving the circular flow
• is negative
• ( - MPC)/ (1 - MPC) or ( - MPC)/ ( MPS)
• tax cut = positive tax multiplier because there is more money in the circular flow