Post your 3 favorite margin notes from this chapter. Why did you highlight and comment on these particular points in the text? (I know some of you don’t take notes as you read – just jot down three things that you found interesting in the chapter and why.)
- On page 374, in section 18-1b of the textbook, the author discusses purchasing foreign bonds and comparing the differences in interest rates that are offered. They also write that investors have to take into account the risk that might arise from purchasing a bond from a government that might not be able to pay the interest or the capital that is put into purchasing the bond. I never thought about buying foreign bonds. Before now, I have only heard of US bonds. It does make sense that other governments would offer them.
- On page 384, in section 118-3a of the textbook, the purchasing power parity is discusses. I found it interesting in the example that they used of purchasing coffee in Seattle and selling it for a profit in Dallas. If this continues to happen, the demand would go up in Seattle and the supply would go up in Dallas. That would cause the previously lowered price of coffee in Seattle to go up and the previously high price of coffee in Dallas would go down. Eventually, the price would go to equilibrium. Another interesting concept I hadn’t thought about before.
- In the case study on page 387-388 of the textbook, the author introduces the concept of the Hamburger Standard. They take the price of the Big Mac from many different countries to try to approximate the exchange rate. Although it is not an exact number for the actual exchange rate, the number is usually close to the actual exchange rate.
My Journey into Macroeconomics 