Sunday, March 21, 2010

WH II Honors: 22 March 2010

Current Events:

Russia Today
March 21, 2010
Thousands of Russians have taken to the streets to participate in so-called Day of Wrath opposition rallies all over the country. Those who oppose the current social and economic policies of the government are demanding protection of their personal liberties and constitutional rights.

`Health care is a right.'

Soviet Constitution

What Soviet Medicine Teaches Us by Yuri N. Maltsev.

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.


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.” In 1918, the Soviet Union became the first country to promise universal "cradle-to-grave" healthcare coverage, to be accomplished through the complete socialization of medicine. The "right to health" became a "constitutional right" of Soviet citizens. The Communists 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


Why did the Red Army prevail over the White Army?

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



Section 4 End of the War

Tanks, 1:46

The Last Year of the War

By 1917, European societies were cracking under the strain of war. Casualties on the fronts and shortages at home sapped morale. The stalemate dragged on, seemingly without end. Soon, however, the departure of one country from the war and the entry of another would tip the balance and end the stalemate.

The world's first tank, Little Willie, 2:50

Tank vs. Tank, 3:21

A German Submarine Sinks the Lusitania

The sinking of the British line Lusitania in 1915, was part of Germany’s policy of unrestricted submarine warfare. The incident was featured in propaganda posters as evidence of German brutality.

A New German Offensive

1918 The last German offensive, 5:32


Despite inspiring propaganda, by 1917 the morale of troops and civilians had plunged. Germany was sending 15-year-old recruits to the front. Britain was on the brink of bankruptcy.

A final showdown on the Western Front began in early 1918. The Germans badly wanted to achieve a major victory before eager American troops arrived in Europe. In March, the Germans launched a huge offensive that by July had pushed the Allies back 40 miles. These efforts exhausted the Germans, however, and by then American troops were arriving by the thousands. The Allies then launched a counterattack, slowly driving German forces back across France and Belgium. In September, German generals told the kaiser that the war could not be won.

Collapse and Armistice

World War I: Voices of the Armistice, 4:27

Uprisings exploded among hungry city dwellers across Germany. German commanders advised the kaiser to step down. William II did so in early November, fleeing into exile in the Netherlands.

By autumn, Austria-Hungary was also reeling toward collapse. As the government in Vienna tottered, the subject nationalities revolted, splintering the empire of the Hapsburgs. Bulgaria and the Ottoman empire also asked for peace.

The new German government sought an armistice, or agreement to end fighting, with the Allies. At 11 a.m. on November 11, 1918, the Great War at last came to an end.

Revolutionary Forces

Rosa Luxemburg (Rosalia Luxemburg, Polish: Róża Luksemburg; 5 March 1871[1] – 15 January 1919) was a Polish Jewish (Marxist) theorist, philosopher, economist and activist who became a naturalized German citizen. She was successively a member of the Social Democracy of the Kingdom of Poland and Lithuania, the German SPD, the Independent Social Democratic Party and the Communist Party of Germany.

In 1915, after the SPD supported German involvement in World War I, she co-founded, with Karl Liebknecht, the anti-war Spartakusbund (Spartacist League). On 1 January 1919 the Spartacist League became the Communist Party of Germany (KPD). In November 1918, during the German Revolution she founded the Die Rote Fahne (The Red Flag), the central organ of the Spartacist movement.

She regarded the Spartacist uprising of January 1919 in Berlin as a blunder, but supported it after Liebknecht ordered it without her knowledge. The revolt was crushed by the Social Democrat government and the Freikorps (WWI veterans defending the Weimar Republic).

The Freikorps, oh Deutschland hoch in Ehren, 3:50

In response to the uprising, Social Democratic leader Friedrich Ebert ordered the Freikorps to destroy the left-wing revolution. Luxemburg and Liebknecht were captured in Berlin on January 15, 1919, by the Freikorps' Garde-Kavallerie-Schützendivision. Its commander, Captain Waldemar Pabst, along with Horst von Pflugk-Hartung questioned them and then gave the order to execute them. Luxemburg was knocked down with a rifle butt, then shot in the head; her body was flung into Berlin's Landwehr Canal. In the Tiergarten Karl Liebknecht was shot and his body, without a name, brought to a morgue. Likewise, hundreds of KPD members were summarily killed, and the Workers' and Soldiers' councils disbanded; the German revolution was ended. More than four months later, on June 1, 1919, Luxemburg's corpse was found and identified. After their deaths, Luxemburg and Karl Liebknecht became martyrs for Marxists.

Reading Check


What happened within Germany after the armistice?

The Peace Settlements

Lloyd George, Clemenceau, and Wilson (left to right) at the Paris Peace Conference.

The victorious Allies met at the Paris Peace Conference to discuss the fate of Europe, the former Ottoman empire, and various colonies around the world. The Central Powers and Russia were not allowed to take part in the negotiations.

Wilson's Proposals

Just weeks after the war ended, President Wilson boarded a steamship bound for France. He had decided to go in person to Paris, where Allied leaders would make the peace. Wilson was certain that he could solve the problems of old Europe. “Tell me what is right,” Wilson urged his advisers, “and I’ll fight for it.” Sadly, it would not be that easy. Europe was a shattered continent. Its problems, and those of the world, would not be solved at the Paris Peace Conference, or for many years afterward.

Wilson was one of three strong leaders who dominated the Paris Peace Conference. He was a dedicated reformer and at times was so stubbornly convinced that he was right that he could be hard to work with. Wilson urged for “peace without victory” based on his Fourteen Points.

peace agreements through open agreements
reducing armaments
self-determination (the right of each people to have its own nation)

Wilson's idealism ran into difficulties in Europe

Treaty of Versailles, 1:15

The Paris Peace Conference


Two other Allied leaders at the peace conference had different aims. British prime minister David Lloyd George had promised to build a postwar Britain “fit for heroes”—a goal that would cost money. The chief goal of the French leader, Georges Clemenceau (klem un soh), was to weaken Germany so that it could never again threaten France. “Mr. Wilson bores me with his Fourteen Points,” complained Clemenceau. “Why, God Almighty has only ten!”

Note Taking

Reading Skill: Categorize

One way to summarize information is to divide it into categories. In the table below, the left-hand column lists issues the world faced after World War I. As you read and listen to the lecture, categorize the information in the text in one of the second two columns.

Crowds of other representatives circled around the “Big Three” with their own demands and interests. The Italian prime minister, Vittorio Orlando (awr lan doh), insisted that the Allies honor their secret agreement to give former Austro-Hungarian lands to Italy. Such secret agreements violated the principle of self-determination.

Self-determination posed other problems. Many people who had been ruled by Russia, Austria-Hungary, or the Ottoman empire now demanded national states of their own. The territories claimed by these peoples often overlapped, so it was impossible to satisfy them all. Some ethnic groups became unwanted minorities in newly created states.

Wilson had to compromise on his Fourteen Points. However, he stood firm on his goal of creating an international League of Nations. The League would be based on the idea of collective security, a system in which a group of nations acts as one to preserve the peace of all. Wilson felt sure that the League could correct any mistakes made in Paris.

People in History

Georges Clemenceau

The Treaty of Versailles

In June 1919, the Allies ordered representatives of the new German Republic to sign the treaty they had drawn up at the palace of Versailles (vur sy) outside Paris. The German delegates were horrified. The treaty forced Germany to assume full blame for causing the war. It also imposed huge reparations that would burden an already damaged German economy. The reparations covered not only the destruction caused by the war, but also pensions for millions of Allied soldiers or their widows and families. The total cost of German reparations would later be calculated at $30 billion (the equivalent of about $2.7 trillion today).

A New Map of Europe

This cartoon portrays one view of the peace treaties that ended World War I.

* The turkey symbolizes Germany.
* Britain holds a carving knife and fork, ready to carve the turkey.
* Other Allies await the feast.

1. What does carving up the turkey symbolize?

2. What attitude do you think that the cartoonist has towards the treaties?


Europe 1914, Europe 1920


Web Code: nap-2641

Map Skills

The peace treaties that ended World War I redrew the map of Europe.

1. Locate

(a) Lithuania (b) Czechoslovakia (c) Yugoslavia (c) Poland (d) Danzig

2. Regions

Which countries lost territory in Eastern Europe?

3. Draw Conclusions

Why might the distribution of territory after World War I leave behind widespread dissatisfaction?

Other parts of the treaty were aimed at weakening Germany. The treaty severely limited the size of the once-feared German military. It returned Alsace and Lorraine to France, removed hundreds of square miles of territory from western and eastern Germany, and stripped Germany of its overseas colonies. The treaty compelled many Germans to leave the homes they had made in Russia, Poland, Alsace-Lorraine, and the German colonies to return to Germany or Austria.

The Germans signed because they had no choice. However, German resentment of the Treaty of Versailles would poison the international climate for 20 years. It would help spark an even deadlier world war in the years to come.

The Allies drew up separate treaties with the other Central Powers. Like the Treaty of Versailles, these treaties left widespread dissatisfaction. Discontented nations waited for a chance to revise the peace settlements in their favor.

Where the German, Austrian, and Russian empires had once ruled, a band of new nations emerged. Poland became an independent nation after more than 100 years of foreign rule. The Baltic states of Latvia, Lithuania, and Estonia fought for and achieved independence.

Three new republics—Czechoslovakia, Austria, and Hungary—rose in the old Hapsburg heartland. In the Balkans, the peacemakers created a new South Slav state, Yugoslavia, dominated by Serbia.

European colonies in Africa, Asia, and the Pacific had looked to the Paris Peace Conference with high hopes. Colonial leaders expected that the peace would bring new respect and an end to imperial rule. However, the leaders at Paris applied self-determination only to parts of Europe. Outside Europe, the victorious Allies added to their overseas empires. The treaties created a system of mandates, territories administered by Western powers. Britain and France gained mandates over German colonies in Africa. Japan and Australia were given mandates over some Pacific islands. The treaties handled lands that used to be part of the Ottoman empire as if they were colonies, too.

In theory, mandates were to be held until they were able to stand alone. In practice, they became European colonies. From Africa to the Middle East and across Asia, people felt betrayed by the peacemakers.

The War's Legacy

Reading Check


What clause in the Treaty of Versailles particularly angered the Germans?

One helpful animation is:

Animated Map: The Western Front, 1914 - 1918

Animated battle of the Somme


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


You can try your luck during several front line missions with

Trench warfare:


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


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.


BBC Schools Links

GCSE Bitesize Revision - History
A secondary revision resource for GCSE exams covering the First World War.

The Bitesize series features audio clips from history and commentators:


Standard Grade Bitesize Revision - History
A secondary revision resource for Standard Grade covering the First World War.

BBC Sites

BBC History - World War One
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


History Trail – How to do History
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
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
Spartacus' World War One website offers a growing encyclopaedia of entries about the war, as well as links to other websites.

First World - The war to end all wars
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)
Gives a summary and commentary on each main study area of the First World War.

Art of the First World War
Presents 100 paintings from international collections from around the world to commemorate the First World War.

The World War One Document Archive
The World War One Document Archive presents primary documents concerning the Great War.

World War 1 - Web Links
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
Information about the National Curriculum for History, QCDA and DfEE schemes of work, pupils' work and information about standards and support materials.

QCDA History
The Qualifications and Curriculum Development Authority (QCDA) History section.

Examine key issues with the help of original documents.


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

World War One News Report, High School History Project

World War 1 Songs, 5:40

Songs are in this order: It's A Long Way to Berlin but We'll Get There, The Yanks Started Yankin, I May Stay Away A Little Longer, It's A Long Way to Tipperary, What Kind of an American Are You, How Ya Gonna Keep Them Down on the Farm


How To Take Effective Notes

Email to

1. Monday: p. 519, #4-6

Finish the sentences:

Last week, what I liked least about the class was . . .

Last week, what I liked most about the class was . . .

AP Economics: 22 March 2010


Current Events:

Legal Challenges to Health Care Overhaul

What Soviet Medicine Teaches Us by Yuri N. Maltsev.

Yuri N. Maltsev, senior fellow of the Mises Institute, worked as an economist on Mikhail Gorbachev's economic reform team before defecting to the United States. He is the editor of Requiem for Marx. He teaches economics at Carthage College.

The Ch. 18 Short Answer Make-Up 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.

For the remainder of the class, 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

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


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. 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
The Bank of New Zealand specifies a range of 1.3% (see its page at http://www. The Central Bank of Iceland specifies
2.5% rise in its CPI over 12 months (
3027620.html). For links to other central bank pages see the page of the Bank
for International Settlements at

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

Monetary Policy Lags

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

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

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.

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 Full text of article is available at
marketfeatures/10289904.html but a concise table with “translations” can be found

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

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

For Further Analysis

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

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.

Reading the Tea Leaves: The Latest from the FOMC

Read the latest press release from the FOMC. Visit its Web site at: http://www. 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.


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

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

This is an excerpt from a longer interview which can be found here

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 ( for more information on this approach to macroeconomics. You can also get more information from Centre of Full Employment and Equity (

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

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. In Ch. 22 email the answers to Questions and Problems, #10-15. If you need to put this on hard copy to answer (e.g., #13), please feel free to do so.

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

Inflation, Unemployment, and Stabilization Policies, Review Questions

2. A government budget deficit occurs when government expenditures are

a) greater than government revenue
b) less than government revenue
c) increasing and government revenue is increasing
d) decreasing and government revenue is decreasing
e) in balance with government revenue

3. Cost-push inflation is caused by a(n)

a) decrease in government regulation
b) increase in government spending
c) decrease in taxes that stimulates new spending
d) increase in wages that go beyond gain in productivity
e) increase in investment spending

4. The short-run Phillips curve is a graph showing the relationship between the

a) price level and the unemployment rate
b) price level and the rate of inflation
c) rate of inflation and the unemployment rate
d) aggregate output and the price level
e) price level and the unemployment rate

5. In the long run, the Phillips curve will be vertical at the natural rate of unemployment if

a) the long-run aggregate demand curve is vertical at potential GDP
b) the long-run aggregate demand curve is horizontal at the natural rate of inflation
c) the long-run supply curve is horizontal at the natural rate of inflation
d) the long-run aggregate supply curve is vertical at potential GDP
e) the long-run aggregate supply curve horizontal at potential GDP