Economic Indicators
Types of unemployment included in NRU
Frictional Unemployment
Structural Unemploymen
Consumption, investment, government spending and net exports
Aggregate demand
Cash and demand deposits
M1 Money
Illustrates the short run trade-off between inflation and unemployment
Phillips Curve
Price of one currency in terms of another currency
Exchange rate
Calculated monthly by the Bureau of Labor Statistics using a 'market basket'
Consumer Price Index
Three reasons for the negative slope of AD curve
Real wealth effect
Interest rate effect
Exchange rate effect
Price of previously issued bonds and interest rates on bonds
Are inversely related
Annual vs. cumulative results of deficit spending
Budget deficit vs. national debt
Accounting system that records a country's international transactions for a particular time period (includes CA and CFA)
Balance of Payments (BOP)
Three ways to calculate GDP
Expenditure Approach
Income Approach
Value-Added Approach
Progressive income tax, unemployment insurance, transfer payments
Automatic stabilizers
Sum of expected real interest rate and inflation
Nominal interest rate
Adverse effect of increased government borrowing
Crowding out and decreased economic growth
Result of demand for a country's goods, services and financial assets
Demand for a country's currency
How much is spent on output vs. how much is actually produced
Nominal GDP vs. Real GDP
Represents maximum sustainable capacity
PPC and LRAS
How money is created
Fractional Reserve Banking
Output per capita is positively related to both physical and human capital per capita
Aggregate production function
What happens when a country's currency appreciates
Their exports seem to be more expensive and therefore go down and imports will go up because they look comparatively less expensive
Four phases: expansion, peak, contraction and trough
Business cycle
Three possible short run equilibrium situations
Long run equilibrium
Inflationary gap
Recessionary gap
Three tools of monetary policy
Open market operations
Discount rate
Reserve requirement
Fiscal policy philosophy which reduce regulations and taxes to increase aggregate demand and aggregate supply
Supply side fiscal policies
Differences in real interest rates across countries effect financial capital movement
Financial capital flows - inflows and outflows