Wednesday, March 17, 2010

WH II Honors: 18 March 2010

Prayer

Put your name on the Ch. 16 Sec. 2 Quiz paper. If you finish early, you may take out non-History materials.




The March Revolution

By March 1917, disasters on the battlefield, combined with food and fuel shortages on the home front, brought the monarchy to collapse. In St. Petersburg (renamed Petrograd during the war), workers were going on strike. Marchers, mostly women, surged through the streets, shouting, “Bread! Bread!” Troops refused to fire on the demonstrators, leaving the government helpless. Finally, on the advice of military and political leaders, the tsar abdicated.

Duma politicians then set up a provisional, or temporary, government. Middle-class liberals in the government began preparing a constitution for a new Russian republic. At the same time, they continued the war against Germany.

Outside the provisional government, revolutionary socialists plotted their own course. In Petrograd and other cities, they set up soviets, or councils of workers and soldiers. At first, the soviets worked democratically within the government. Before long, though, the Bolsheviks, a radical socialist group, took charge. The leader of the Bolsheviks was a determined revolutionary, V. I. Lenin.

The revolutions of March and November 1917 are known to Russians as the February and October revolutions. In 1917, Russia still used an old calendar, which was 13 days behind the one used in Western Europe. Russia adopted the Western calendar in 1918.

Reading Check

Identifying

Develop a sequence of events leading to the March Revolution.

The Rise of Lenin

Lenin
A profile of Lenin:
Cf. http://www.spartacus.schoolnet.co.uk/RUSlenin.htm

Vladimir Ilyich Ulyanov (ool yahn uf) was born in 1870 to a middle-class family. He adopted the name Lenin when he became a revolutionary. He adopted the pseudonym of "Lenin" in 1901 following his Siberian exile for attempting to publish an illegal newspaper called The Workers Cause. The pseudonym was fashioned from the name of the river Lena in Siberia.

Significantly, when he was 17, his older brother was arrested and hanged for plotting to kill the tsar. The execution branded his family as a threat to the state and made the young Vladimir hate the tsarist government.

Lenin (1870–1924) was the son of a teacher and his wife who lived in a little town on the Volga River. Vladimir lived with his parents and five siblings in a rented wing of a large house. By all accounts it was a happy home. Vladimir excelled at school and looked up to his older brother Alexander. But when Vladimir was 16, his father died. When he was 17, his beloved brother Alexander was hanged for plotting to kill the tsar.

Still reeling from the death of his brother, Vladimir enrolled at Kazan University. There he met other discontented young people. They united to protest the lack of student freedom in the university. Within three months, Vladimir was expelled for his part in the demonstrations. How do you think Lenin’s early life affected his later political ideas?

A Brilliant Revolutionary

As a young man, Lenin read the works of Karl Marx and participated in student demonstrations. He spread Marxist ideas among factory workers along with other socialists, including Nadezhda Krupskaya (nah dyez duh kroop sky uh), the daughter of a poor noble family. In 1895, Lenin and Krupskaya were arrested and sent to Siberia. During their imprisonment, they were married. After their release, they went into exile in Switzerland. There they worked tirelessly to spread revolutionary ideas.

Lenin’s View of Marx

Lenin adapted Marxist ideas to fit Russian conditions. Marx had predicted that the industrial working class would rise spontaneously to overthrow capitalism. But Russia did not have a large urban proletariat. Instead, Lenin called for an elite group to lead the revolution and set up a “dictatorship of the proletariat.” Though this elite revolutionary party represented a small percentage of socialists, Lenin gave them the name Bolsheviks, meaning “majority.”

In Western Europe, many leading socialists had come to think that socialism could be achieved through gradual and moderate reforms such as higher wages, increased suffrage, and social welfare programs. A group of socialists in Russia, the Mensheviks, favored this approach. The Bolsheviks rejected it. To Lenin, reforms of this nature were merely capitalist tricks to repress the masses. Only revolution, he said, could bring about needed changes.

In March 1917, Lenin was still in exile. As Russia stumbled into revolution, Germany saw a chance to weaken its enemy by helping Lenin return home. Lenin rushed across Germany to the Russian frontier in a special train. He greeted a crowd of fellow exiles and activists with this cry: “Long live the worldwide Socialist revolution!”

Reading Check

Examining

What was Lenin's plan when he arrived in Russia?

The Bolsheviks Seize Power

Lenin threw himself into the work of furthering the revolution. Another dynamic Marxist revolutionary, Leon Trotsky, helped lead the fight. To the hungry, war-weary Russian people, Lenin and the Bolsheviks promised “Peace, Land, and Bread.”

The Provisional Government’s Mistakes

Meanwhile, the provisional government, led by Alexander Kerensky, continued the war effort and failed to deal with land reform. Those decisions proved fatal. Most Russians were tired of war. Troops at the front were deserting in droves. Peasants wanted land, while city workers demanded an end to the desperate shortages. In July 1917, the government launched the disastrous Kerensky offensive against Germany. By November, according to one official report, the army was “a huge crowd of tired, poorly clad, poorly fed, embittered men.” Growing numbers of troops mutinied. Peasants seized land and drove off fearful landlords.

The Bolshevik Takeover

Conditions were ripe for the Bolsheviks to make their move. In November 1917, squads of Red Guards—armed factory workers—joined mutinous sailors from the Russian fleet in attacking the provisional government. In just a matter of days, Lenin’s forces overthrew the provisional government without a struggle.

The Bolsheviks quickly seized power in other cities. In Moscow, it took a week of fighting to blast the local government out of the walled Kremlin, the former tsarist center of government. Moscow became the Bolsheviks’ capital, and the Kremlin their headquarters.

“We shall now occupy ourselves in Russia in building up a proletarian socialist state,” declared Lenin. The Bolsheviks ended private ownership of land and distributed land to peasants. Workers were given control of the factories and mines. A new red flag with an entwined hammer and sickle symbolized union between workers and peasants. Throughout the land, millions thought they had at last gained control over their own lives. In fact, the Bolsheviks—renamed Communists—would soon become their new masters.

In November, 1917, Vladimir Lenin sent Leon Trotsky to negotiate with the Central Powers at Brest-Litovsk. He wrote about these negotiations in his autobiography, My Life.

It was obvious that going on with the war was impossible. On this point there was not even a shadow of disagreement between Lenin and me. But there was another question. How had the February revolution, and, later on, the October revolution, affected the German army? How soon would any effect show itself? To these questions no answer could as yet be given. We had to try and find it in the course of the negotiations as long as we could. It was necessary to give the European workers time to absorb properly the very fact of the Soviet revolution.

In his autobiography Leon Trotsky explained why he signed the Brest-Litovsk Treaty.

On 21st February, we received new terms from Germany, framed, apparently, with the direct object of making the signing of peace impossible. By the time our delegation returned to Brest-Litovsk, these terms, as is well known, had been made even harsher. All of us, including Lenin, were of the impression that the Germans had come to an agreement with the Allies about crushing the Soviets, and that a peace on the western front was to be built on the bones of the Russian revolution.

On 3rd March our delegation signed the peace treaty without even reading it. Forestalling many of the ideas of Clemenceau, the Brest-Litovsk peace was like the hangman's noose. On 22nd March the treaty was ratified by the German Reichstag. The German Social Democrats gave their approval in advance to the future principles of Versailles.

Reading Check

Describing

What was the impact of the Treaty of Brest-Litovsk on Russia?

Civil War in Russia

After the Bolshevik Revolution, Lenin quickly sought peace with Germany. Russia signed the Treaty of Brest-Litovsk in March 1918, giving up a huge chunk of its territory and its population. The cost of peace was extremely high, but the Communist leaders knew that they needed all their energy to defeat a collection of enemies at home. Russia’s withdrawal affected the hopes of both the Allies and the Central Powers, as you read in Section 3.
Vocabulary Builder

withdrawal—(with draw ul) n. the act of leaving

Opposing Forces

For three years, civil war raged between the “Reds,” as the Communists were known, and the counterrevolutionary “Whites.” The “White” armies were made up of tsarist imperial officers, Mensheviks, democrats, and others, all of whom were united only by their desire to defeat the Bolsheviks. Nationalist groups from many of the former empire’s non-Russian regions joined them in their fight. Poland, Estonia, Latvia, and Lithuania broke free, but nationalists in Ukraine, the Caucasus, and Central Asia were eventually subdued.

The Allies intervened in the civil war. They hoped that the Whites might overthrow the Communists and support the fight against Germany. Britain, France, and the United States sent forces to help the Whites. Japan seized land in East Asia that tsarist Russia had once claimed. The Allied presence, however, did little to help the Whites. The Reds appealed to nationalism and urged Russians to drive out the foreigners. In the long run, the Allied invasion fed Communist distrust of the West.

Brutality was common in the civil war. Counterrevolutionary forces slaughtered captured Communists and tried to assassinate Lenin. The Communists shot the former tsar and tsarina and their five children in July 1918 to keep them from becoming a rallying symbol for counterrevolutionary forces.

Identifying

Who opposed the new Bolshevik regime?

Triumph of the Communists

The Communists used terror not only against the Whites, but also to control their own people. They organized the Cheka, a secret police force much like the tsar’s. The Cheka executed ordinary citizens, even if they were only suspected of taking action against the revolution. The Communists also set up a network of forced-labor camps in 1919—which grew under Stalin into the dreaded Gulag.

The Communists adopted a policy known as “war communism.” They took over banks, mines, factories, and railroads. Peasants in the countryside were forced to deliver almost all of their crops to feed the army and hungry people in the cities. Peasant laborers were drafted into the military or forced to work in factories.

Meanwhile, Trotsky turned the Red Army into an effective fighting force. He used former tsarist officers under the close watch of commissars, Communist party officials assigned to the army to teach party principles and ensure party loyalty. Trotsky’s passionate speeches roused soldiers to fight. So did the order to shoot every tenth man if a unit performed poorly.

The Reds’ position in the center of Russia gave them a strategic advantage. The White armies were forced to attack separately from all sides. They were never able to cooperate effectively with one another. By 1921, the Communists had managed to defeat their scattered foes.

Reading Check

Contrasting

Why did the Red Army prevail over the White Army?

War and Revolution in Russia 1914 - 1921 by Dr Jonathan Smele

Cf. http://www.bbc.co.uk/history/worldwars/wwone/eastern_front_01.shtml

Preview

Section 4 End of the War

Tanks, 1:46



Cassell Military Classics: Iron Fist: Classic Armoured Warfare by Bryan Perrett

References
One helpful animation is:

Animated Map: The Western Front, 1914 - 1918

Animated battle of the Somme

Cf. http://www.bbc.co.uk/history/worldwars/wwone/launch_ani_somme_map.shtml

Among other animations, you can view: Life in the Trenches

Cf. http://www.bbc.co.uk/history/interactive/animations/wwone_movies/index_embed.shtml

You can try your luck during several front line missions with

Trench warfare:

Cf. http://www.bbc.co.uk/schools/worldwarone/hq/trenchwarfare.shtml

By the time the Yanks get involved there is a popular song which memorialized American involvement:

Cf. http://www.loc.gov/teachers/classroommaterials/presentationsandactivities/activities/songs/

American involvement in WW I, 4:11

The Great War #1, World War 1 Era Period Music and Pictures. WW 1 spanned from August of 1914 to November of 1918 and raged across the globe. The United States was officially involved in the war from April 1917 to the end.

The dough boys are nearly forgotten today in the shadow of World War 2, Vietnam and Iraq. Millions of American men and women, black and white, served our country in The Great War. This series of shorts shows the music of their time and photographs from the Great War.



Links

BBC Schools Links

GCSE Bitesize Revision - History
bbc.co.uk/schools/gcsebitesize/history/
A secondary revision resource for GCSE exams covering the First World War.

The Bitesize series features audio clips from history and commentators:

Cf. http://www.bbc.co.uk/schools/gcsebitesize/history/mwh/

Standard Grade Bitesize Revision - History
bbc.co.uk/scotland/learning/bitesize/standard/history/
A secondary revision resource for Standard Grade covering the First World War.

BBC Sites

BBC History - World War One
bbc.co.uk/history/worldwars/wwone/
This World War One site from BBC History features interactive movies, animations, feature articles and 3-d models.

One helpful animation is:

Animated Map: The Western Front, 1914 - 1918

Cf. http://www.bbc.co.uk/history/worldwars/wwone/launch_ani_western_front.shtml

History Trail – How to do History
bbc.co.uk/history/lj/how_to_do_historylj/preview.shtml
Follow in the footsteps of professional historians and find out how they do history. Discover how postcards, council records, tapestries and people's memories of the past are all valuable sources for the historian.

Other Sites

Learning Curve – The Great War
http://www.learningcurve.gov.uk/greatwar
This is a comprehensive offering from the Public Records Office, which tells the story of the First World War through six different source based investigations. It aims to show how the War developed and includes teachers' notes.

Spartacus Educational – The First World War
http://www.spartacus.schoolnet.co.uk/FWW.htm
Spartacus' World War One website offers a growing encyclopaedia of entries about the war, as well as links to other websites.

First World War.com - The war to end all wars
http://www.firstworldwar.com
This site gives a general overview of the First World War. It offers a collection of insightful feature articles, photos and footage, memoirs and diaries.

Spark Notes – World War 1 (1914-1918)
http://www.sparknotes.com/history/european/ww1/
Gives a summary and commentary on each main study area of the First World War.

Art of the First World War
http://www.art-ww1.com/gb/present.html
Presents 100 paintings from international collections from around the world to commemorate the First World War.

The World War One Document Archive
http://www.art-ww1.com/gb/present.html
The World War One Document Archive presents primary documents concerning the Great War.

World War 1 - Web Links
http://www.historyteacher.net/APEuroCourse/WebLinks/WebLinks-WorldWar1.htm
This site lists links to in-depth articles on all aspects of the First World War, including a large collection of links to primary source material.

National Curriculum Online: History
http://curriculum.qcda.gov.uk/key-stages-3-and-4/subjects/history/index.aspx?return=/key-stages-3-and-4/subjects/index.aspx
Information about the National Curriculum for History, QCDA and DfEE schemes of work, pupils' work and information about standards and support materials.

QCDA History
http://www.qcda.gov.uk/6354.aspx
The Qualifications and Curriculum Development Authority (QCDA) History section.

Examine key issues with the help of original documents.

Cf. http://www.nationalarchives.gov.uk/education/greatwar/g1/

The best overall war reference for the entire modern period:

War Made New: Weapons, Warriors, and the Making of the Modern World by Max Boot

All Quiet on the Western Front by Erich Maria Remarque

Cassell Military Classics: Iron Fist: Classic Armoured Warfare by Bryan Perrett

Day of the Assassins: A Jack Christie Novel by Johnny O'Brien

War in the Air 1914-45 (Smithsonian History of Warfare) by Williamson Murray
The Encyclopedia of Warfare: The Changing Nature of Warfare From Prehistory to Modern-day Armed Conflicts by Robin Cross, pp. 170-193.

The Encyclopedia of Weaponry: The Development of Weaponry from Prehistory to 21st Century Warfare, Ian V. Hogg, pp. 112-139.

Battles and Campaigns (Mapping History) by Malcolm Swanston

A documentary about the battle of the Somme 1916 part 1, 9:58


War and Revolution in Russia 1914 - 1921

By Dr Jonathan Smele

Cf. http://www.bbc.co.uk/history/worldwars/wwone/eastern_front_01.shtml
World War One News Report, High School History Project



Soviet Pioneer Song: May There Always Be Sunshine, 3:04

This video is a tribute to Young Pioneer organization of the Soviet Union (1922 - 1991).

The Young Pioneer Organization of the Soviet Union (Всесою́зная пионе́рская организа́ция и́мени) was a mass youth organization of the USSR for children of age 10-15 in the Soviet Union between 1922 and 1991.

The music is a old soviet pioneer song from 1966.
English song name: "May There Always Be Sunshine"
Russian song name: "Пусть всегда будет солнце"
Official song name: "Солнечный круг"

May There Always Be Sunshine (Russian: Пусть всегда будет солнце! Actual Russian Title: Солнечный круг) is a Soviet Russian song, written for children. It was created in 1962, music was composed by Arkady Ostrovsky and the lyrics were written by Lev Oshanin. The Russian writer Korney Chukovsky later wrote in his book that the base for the song was the four lines which became the refrain, composed by a boy of age four in 1928.

Performed for the first time in 1962 at the Sopot International Song Festival by Russian singer Tamara Miansarova it earned the first prize for her there and immediately became widespread in the USSR and some other countries. It was sung by Young Pioneers in Young Pioneer camps, Young Pioneer meetings and at schools; it was sung by Little Octobrists at schools; it was sung even by pre-school children. This song was widely considered as a symbol of peace in the Soviet Union.

It is one of few Soviet songs which did not lose much of their popularity after the USSR and the Young Pioneer organization of the Soviet Union ceased to exist, and are still popular in Russia.

The song was translated into German by Ilse and Hans Naumilkat and Manfred Streubel (as Immer lebe die Sonne) and was popular among Ernst Thälmann Pioneers.

Lyrics:


Russian:

Солнечный круг,
Небо вокруг —
Это рисунок мальчишки.
Нарисовал он на листке
И подписал в уголке:
Припев:
— Пусть всегда будет солнце,
Пусть всегда будет небо,
Пусть всегда будет мама,
Пусть всегда буду я!


Russian (latin)

Solnechnyi krug,
Nebo vokrug —
Ehto risunok mal'chishki
Narisoval on na listke
I podpisal v ugolke:
Pripev:
— Pust' vsegda budet solntse,
Pust' vsegda budet nebo,
Pust' vsegda budet mama,
Pust' vsegda budu ya!


English:

Circle of sun,
Sky all around;
This is the young boy's drawing.
He drew on the paper,
And signed in the corner:
Chorus:
May there always be sun
May there always be sky,
May there always be mother,
May there always be me!



Back In The USSR: The Beatles, 2:43



A Rock version of the Russian National Anthem, 3:15



How To Take Effective Notes

Email to gmsmith@shanahan.org

1. Thursday: p. 517

Reading Check

Examining

What was Lenin's plan when he arrived in Russia?

Reading Check

Describing

What was the impact of the Treaty of Brest-Litovsk on Russia?

AP Economics: 18 March 2010

Prayer





The Ch. 18 Short Answer Test is today; put your name on the Test and a blank sheet of paper. Use a blank sheet of paper (s) to answer the questions. If you finish early you may take out non-Economics material.

We will pick up where we left off in Chapter 22, Monetary Policy.

Chapter Overview

Having introduced the Federal Reserve System and its tools for monetary policy in Chapter 21, this chapter begins by considering how money affects the economy (both the long-run quantity theory and the short-run analysis of interest rate channels are covered). The next section discusses the lags in monetary policy (you may wish to relate this section to the corresponding section in the chapter on fiscal policy). The chapter continues with a section on implementing monetary policy that raises the questions of rules versus discretion and which (if any) targets should be used by the Federal Reserve. A final consideration of transparency and the Fed concludes the chapter.

Chapter Outline

Monetary Theories

Introduction to Monetary Policy, 2:59


The Long Run: Quantity Theory

The Equation of Exchange

The equation of exchange, 3:39


Classical Money Transmission Mechanism

The Short Run: Interest Rate Channels

Keynesian Monetary Analysis

Monetarist Model

Milton Friedman: The Purpose of the Federal Reserve, 4:55


Checkpoint: Monetary Theories

Monetary Policy Lags

Information Lags

Recognition Lags

Decision Lags

Implementation Lags

Response, Implementation, Recognition Lags, 4:23


Checkpoint: Monetary Policy Lags

Implementing Monetary Policy

Monetary Policy Targets

Long Run: Price Stability

Short Run: Price Level and Income

Rules or Discretion?

Simple Rules (Targets) to Guide Monetary Policy

Monetary Targeting

Target rates vs. money supply, 11:39

The rationale for targeting interest rates instead of directly having a money supply target.


Inflation Targeting

The Bank is injecting money directly into the economy to meet the inflation target, 3:46

Cf. http://www.youtube.com/watch?v=J9wRq6C2fgo

The Fed's Performance

Bernanke Maintains that the Fed Should Not Be Audited, 2:07

Checkpoint: Implementing Monetary Policy

Transparency and the Federal Reserve

Ben Bernanke Refuses Transparency, 2:36


Ideas for Capturing Your Classroom Audience

Why do people anticipate what action the FOMC will take? Illustrate how
changes in interest rates cause changes in bond prices using a value calculator such as the one available on the Smart Money site on the Web at http://www. smartmoney.com/onebond/index.cfm?story=bondcalculator. This allows you to change the bond parameters and instantly see the effects on price. Point out that the Fed�fs actions ultimately affect market interest rates which in turn affect the value of bonds.

Compare the Fed to other central banks. The Bank of England publishes an
express inflation rate target on its Web site at http://www.bankofengland.co.uk/.
The Bank of New Zealand specifies a range of 1.3% (see its page at http://www.
rbnz.govt.nz/monpol/pta/3027620.html). The Central Bank of Iceland specifies
2.5% rise in its CPI over 12 months (http://www.rbnz.govt.nz/monpol/pta/
3027620.html). For links to other central bank pages see the page of the Bank
for International Settlements at http://www.bis.org/cbanks.htm.

Chapter Checkpoints

Monetary Theories

Question: Of the three motives for holding money, which one is most important for
monetary policy?

The point is to check that students can: apply their understanding of the three
motives for holding money to the mechanism by which monetary policy affects the
economy.

Monetary Policy Lags

Question: Why are monetary policy lags important to the effectiveness of monetary
policy?

The point is to check that students can: integrate the material on lags in monetary policy with their prior knowledge of the business cycle and the goal of monetary policy.

Implementing Monetary Policy

Question: Explain why a negative supply shock such as rising oil prices is a difficult problem for monetary authorities to compensate for.

The point is to check that students can: relate their understanding of what monetary policy makers can do (what effect their actions can have on the economy) to
their prior knowledge of the effect of supply shocks.

Extended Example in the Chapter

Transparency and the Federal Reserve

When Alan Greenspan became its chairman in 1987 the transparency of the Fed
began to increase. By 1994 the Fed was releasing a policy statement each time it
changed interest rates, and by 1998 it also started to state its forecast of what would probably happen in the next month or so. By 2000, the FOMC released a statement after each of its eight meetings even if policy remained the same.

Transparency is controversial within the Fed, particularly with regard to “forwardlooking transparency.” Some believe that statements about the Fed’s views of
where the economy is headed can tie its hand by revealing likely future courses of
action. (NOTE: The key to understanding that view is believing that if the market
expects the Fed to change rates (in either direction) it will change bond purchasing
behavior and so will affect interest rates even before the Fed actually does anything,
in effect making the Fed’s action, when it comes, have no further effect on
the markets.)

This section references an article by Greg Ip, “The Fed’s Big Question: Not What to
Do, But What to Say” (The Wall Street Journal, October 27, 2003, page A1). The
debate about transparency that occurs within the Fed cites two articles by William
Poole (President of the Federal Reserve Bank of St. Louis); they are “Fed
Transparency: How, Not Whether,” from the Federal Reserve Bank of St. Louis
Review, November/December 2003 and “FOMC Transparency,” also from the
Federal Reserve Bank of St. Louis Review, January/February 2005. Past issues of
the review are available on the Bank’s Web site at http://research.stlouisfed.org/
publications/review/past/.

Also cited is a response by Ben Bernanke, Thomas Laubach, Frederic Mishkin, and
Adam S. Posen to a review of their book Missing the Mark: The Truth About
Inflation Targeting. Writing in Foreign Affairs (September/October 1999), the
authors restate their theses in response to the review that had been written by
James K. Galbraith. The response can be read on the Web at: http://www.
foreignaffairs.org/19990901faresponse1013/ben-bernanke-thomas-laubachfrederic-
mishkin-adam-s-posen/missing-the-mark-the-truth-about-inflationtargeting.
html.

Examples Used in the End-of-Chapter Questions

Question 1 cites an article by Brian Wesbury titled “Economic Rehab” from The Wall
Street Journal, June 7, 2006, p. A14. In the article Wesbury suggests that Bernanke
is being unfairly criticized for a series of missteps. To put this in the context of
transparency, look at the list of Bernanke statements compiled by Liz Rappaport of
TheStreet.com. Full text of article is available at http://www.thestreet.com/markets/
marketfeatures/10289904.html but a concise table with “translations” can be found
at: http://bigpicture.typepad.com/comments/2006/06/tracking_bernan.html.

Question 3 references the European Central Bank. For a statement on the Bank’s
policy with regard to inflation and other information about its functions and objectives,
see its Web site at http://www.ecb.int/mopo/html/index.en.html.

Question 9 could be extended to a discussion of whether or not there is such a thing
as a “liquidity trap.” If you choose to address that topic, recent experiences in Japan
provide interesting illustrations.

Question 12 discusses transparency and inflation targets. For more discussion of
this topic with regard to Federal Reserve Chairman Ben Bernanke (and Governor
Frederic Mishkin) see the article from The Economist titled “The Federal Reserve’s
Chairman Hitting his Stride” (February 1, 2007, available on the Web at http://www.
economist.com/finance/displaystory.cfm?story_id=8641615).

For Further Analysis

Using the AS/AD Model to Explore the Impacts of Expansionary Monetary
Policy

This example can be used as an in-class small group exercise or as an individual inclass exercise. It is designed to complement the text’s material by employing the
graphical analysis of the AS/AD model to illustrate the effects of expansionary monetary policy when the economy is below full employment and when it is above full
employment. It would not be difficult to adapt the handout to have students consider
contractionary policy as well.

The third question in the handout can be deleted if desired; it asks students to
explain the circumstances under which cuts in the target federal funds rate might
NOT occur. This can be useful if you want to discuss the time period during which
the Fed kept the target rate unchanged.

Note that #13 of the end-of-chapter Questions and Problems uses only short-run
analysis and asks students to compare monetary policy actions in the context of
demand shocks versus supply shocks. The purpose of this exercise is to show how
monetary policy can make things worse if the current position of the economy versus
long-run aggregate supply is unclear.

Web-Based Exercise

This example can be used as a small group exercise or as an individual exercise.
The exercise provides an opportunity for students to apply the material in the chapter about the FOMC and how it communicates with the public by having students
read the latest press release. It is advisable to review how the process works before giving this assignment (for example, what is the target federal funds rate?). You may also wish to assign more than one press release to have students “track” the FOMC’s views over time.

Links to all the FOMC statements can be found at: http://www.federalreserve.
gov/FOMC/#calendars.

Reading the Tea Leaves: The Latest from the FOMC

Read the latest press release from the FOMC. Visit its Web site at: http://www.
federalreserve.gov/FOMC/#calendars and click on the “Statement” link for the most
recent date on the calendar.

After reading the statement, answer the following:
1) What did the FOMC decide to do?
2) What is the “tilt” statement embedded in the statement?
3) Was the vote on the statement unanimous? What do you conclude from the
voting result?

Tips from a Colleague

This material can be of great interest to students when they realize how critical the Fed’s conduct of monetary policy is to the action in financial markets. You may wish to create a compilation of articles in the business/financial press in advance of an FOMC meeting and then those following it to emphasize how expectations were formed about the Fed’s actions and whether those expectation were met or not.

Using the AS/AD Model to Explore the Impacts of Expansionary Monetary Policy
The job of the FOMC is to assess the current (and future) path of the economy and decide whether or not monetary policy action is indicated at any point in time. One of the many challenges they face is trying to evaluate where the economy is relative to its full employment level.

References

Milton Friedman - Socialized Medicine, 9:37

Nobel Laureate Economist Milton Friedman explores the unsettling dynamics set into motion when government imposes itself into the health care system. (1978)


Hayek on Milton Friedman and Monetary Policy, 4:56

Friedrich Hayek discusses Milton Friedman's Monetarism and monetary policy.

For more on Hayek's ideas on monetary policy see
Choice in Currency: A way to stop inflation
(for a concise summary) at

http://www.iea.org.uk/files/upld-book...

or see The Denationalisation
of Money for a more a more detailed proposal at

http://www.iea.org.uk/files/upld-book...

This is an excerpt from a longer interview which can be found here http://www.vimeo.com/4063439


Milton Friedman on Slavery and Colonization, 8:43


Modern monetary theory - Mitchell and Wray

This is a series of Modern monetary theory interviews - Professors Bill Mitchell and Randy Wray. See billy blog (http://bilbo.economicoutlook.net/blog) for more information on this approach to macroeconomics. You can also get more information from Centre of Full Employment and Equity (http://e1.newcastle.edu.au/coffee).

Questions asked:
A fundamental or central part of the research of both of you is centred on the nature of money. Could you perhaps talk a little bit about the nature of money and particularly explain to non-economists what fiat money is and what the implications it has on policy formation?



Email HW to gmsmith@shanahan.org

1. Be sure to review Chapters 19-21 (we will have Quizzes and Tests on this material as well, TBA). Some students have asked to be tested as close as possible after covering the material.

2. Read Ch. 22, review the Checkpoint sections, and check your responses with the Answers on p. 595.

3. As review for HW, typical questions that you may encounter on the actual AP Economics Macro Test are included daily:

Financial Sector, Review Questions

7. Suppose that the money market is currently in equilibrium, but the Fed wants to reduce the interest rate. The Fed should pursue policies to

a) increase the money supply
b) decrease the money supply
c) increase the demand for money
d) make the supply of money more inelastic
e) decrease the demand for money

8. As the interest rate increase

a) investment decreases, but aggregate demand remains constant
b) investment decreases and aggregate demand decreases
c) investment increases, but aggregate demand remains constant
d) investment increases and aggregate demand increases
e) both investment and aggregate demand remain constant

9. When people hold money in the anticipation of future cash0based exchanges, they are acting from the

a) speculative motive
B) precautionary motive
C) transactions motive
D) profit motive
E) production motive