Unit 6 Flashcards
balance of payments
summary of a nation’s international trade. It is made up of current account (CA) and capital and financial account (CFA)
What is current account made up of (3)
-trade (net exports)
-investment income
-net transfers
investment income
money earned by doing business elsewhere
what are net transfers?
money flowing from one country to another
capital and financial account (CFA)
measures the purchase and sale of financial assets abroad
foreign direct investment
foreign companies buy businesses abroad
net capital outflow
difference between the purchase of foreign assets and domestic assets
Capital Stock
Item that can produce more goods
Stagflation
Both inflation and unemployment are rising
Supply shock
Event that suddenly increases/decreases the supply of a good or service
Autonomous consumption
Expedientares consumers make even when their disposable income is 0
Crowding out
Increased interest rates causes a reduction in investment spending
Velocity of money
Rate at which money is exchanged in an economy
Demand deposits
Funds held in an account that can be withdrawn at any time
Excess reserves
Money held by a bank beyond what is required by the reserve requirement
Federal funds rate
Interest rate banks charge other banks
Leakages
Capital/income that escapes an economy in terms of the circular flow
Fiat money
Medium that serves as currency but has no other intrigaron value
Foreign direct investment
Purchase of an asset in another country
Infrastructure
Structure within an economy that facilitates the economic activity of bridges, roads, railroads,etc
Opportunity cost
Loss of potential gain from alternatives when one choice is made
Trade offs
What you give up in a choice
Nominal gdp
GDP not adjusted for inflation
Real GDP
Adjusted for inflation
Nominal interest rate
The actual interest rate paid
Real interest rate
Rate adjusted for inflation (includes just the expected inflation)
Labor force
All members of a population that are able to work
Inflation rate
Rate of increase of prices in a given period of time
CPI
A measure of the average change in price of a good over time
Equilibrium
AD Equals AS
Exchange rate
Price of one currency relative to another currency
FOREX Shifters
-change in tastes
-change in relative income
-change in relative price level
-change in relative interest rates
What do the following phrases indicate
-silver per gold
-silver price in gold
-value of gold per silver
Exchange rate
