3 Microeconomic decision makers Flashcards
Bartering
System of exchange where people trade non money items between each other.
The functions of money
Medium of exchange- Widely accepted value
Unit of account- Able to assign a value to each amount
Store of value- Always keeps the same value
Money acts as a standard for deferred (delayed) payments.
Central bank and what does it do
The government’s bank. It is responsible for setting up and maintaining the financial system in an economy, and carrying out the monetary policy.
Monetary policy
Controlling the money supply in an economy by changing interest rates and the amount of currency in circulation.
Central banks job
Currency stability
Controlled inflation
Responsibilities of Central banks
Controlling the money supply
Managing foreign exchange and gold reserves
How does the bank do its job
Managing interest rates
Setting reserve requirements
Lending to the banking sector
Interest rate hikes
leads to what
Lower Economic growth and slower inflation
Interest rate cut
Helps do what
Higher economic growth and faster inflation
Required reserves
The minimum amount of deposit that banks might hold by law
Excess reserves
Back reserves over and above their required reserves. This is the amount they can loan out.
What do commercial banks do
A commercial bank is an institution that offers financial services to firms and households in the economy.
Bad debts
Occur when people and businesses cannot repay a loan.
Borrowing
Occurs when an individual, firm or government takes out a loan from a financial institution, paying back the debt with interest over a period of time.
Collateral
This means security for a loan.
e.g. property in the case of a mortgage
Conspicuous consumption
Occurs people purchase highly expensive goods and services due to status or desired image.
Consumer spending
Refers to earning of an individual after income tax and other charges have been deducted.
Disposable income
Refers to the earnings of an individual after income tax and other charges have been deducted.
Aggregate demand (GDP)
C + I+ G + (x-m)
Consumer spending
Business investment
Government spending
Export
Import
Dissaving
occurs when people spend their savings.
Income
Is the total amount of earnings an individual receives in a period of time. It may consist of wages, interest, dividends, profits and rental income.
Mortgage
Is a secured loan for the purchase of a property.
Saving
Occurs when a person puts aside some of their current income for future spending.
Saving ratio
Refers to the proportion of household income which is saved instead of consumed in an economy.
Wealth
Is measured by the value of assets a person owns minus their liabilities (the amount they owe to others).
Why do women earn 80% of what men do
Women choose lower-earning college majors
Women are more likely to have unpaid family responsibilities
Women are less likely to negotiate wages
Gender discrimination
Monopsony
A market situation in which there is only one buyer.
Monopoly
The exclusive possession or control of supply of or trade in a commodity or service.
Trade union
Is an organisation that aims to protect the interests of its members. mainly the terms of pay and conditions of employment.
Collective bargaining
Occurs when a trade union representative negotiates on behalf of the union’s members with the employer to reach an agreement that both sides find acceptable.
A go slow
Occurs when workers decide to complete their work in a leisurely way and therefore productivity falls .
Industrial action
Industrial action is any deliberate act to disrupt the operations of a firm in order to force the management to negotiate better terms and conditions of employment, e.g. strike
