Christiana's AP Macroeconomics Blog

-Measures of money inflows and outflows between the U.S and the rest of the world          Inflows are known as credits           Outflows are known as debits -Divided into 3 accounts           Current Account           Financial (capital) Account          Official Reserves Current Account - balance of trade or Xn (Exports-Imports)        Export (credit/asset)        Import (debit/liability) - Net Foreign Income (Net Investment)        income earned by U.S owned-foreign assets        income paid to foreign-held U.S assets - Net Transfers (Foreign Aid )        Humanitarian efforts Capital/Financial Accoun...

Key-Terms: Stagflation-  high inflation and high unemployment at the same time Deflation- a fall in the average level of prices in an economy Disinflation- reduction in inflation from year to year and can be seen in LRPC Inflation-  rise in the general level of prices in an economy (Zimbabwe) NRU = frictional, structural, and season unemployment Misery Index= combination of inflation and unemployment in any given year (single digit misery if good) Hyperinflation- where there is an unusually high rate of inflation which can cause the currency to lose value (Zimbabwe) Supply Side Economics(Reaganomics) *changes in AS and not AD determines the level of inflation, unemployment rates, and economic growth *trickle down effect : rich receive benefit before poor economic growth is created by lowering taxes and decreasing regulation lower tax rates provide positive work incentives and thus shifts the AS curve to the right Laffer Curve  -depicts a theor...

Foreign Exchange - buying and selling of currency Appreciation: strong dollar             (dollar buys more of another currency and results in less expensive imports and more             expensive exports)             leads to trade deficits             Import will increase b/c they are cheaper Depreciation : weak dollar -dollar buys less of another country -results in ,more expensive imports and less expensive exports -leads to trade surplus *currency is rather weak

Uses of Money *medium of exchange *unit of account (economic value) *store of value Types of Money *Commodity Money (ex: gold, silver) *Representative Money (IOU) *Fiat Money -money b/c gov't said so Characteristics of Money *Durability - money is able to withstand physical wear and tear (more quality than paper) *Portability- money is easily transferable *Divisibility- money can easily broken down *Uniformity - standardized currency *Scarcity - only available in limited qualities *Acceptability - money is exchange for goods and services Money Supply * M1 money (75%) -cash, coins, currency, travelers' check, demand or checkable deposits (CD, major component of M1 money) * M2 money -M1 money + savings account * M3 money -M2 money + money market accts + CD's (certificate of deposit) Liquidity - easy to convert to cash (M1 and M2) Balance Sheet -summarizes financial position of the bank at a certain time (T account - T chart) Assets (own) ...

Reserve Requirement - banks must hold a % of all private deposits in the volt, this can not be used for loans, raising the RR , forces banks to reduce loans. Lowering the RR allows banks to create more loans Discount Rate - FDIC member banks and other eligible institutions may burrow short-term loans directly from the Fed >considered to the bank's last resort -banks do NOT like to burrow from the bank Federal Fund Rate- FDIC member banks loan each other overnight funds (like burrowing from brother or home-girl - friendly loan) burrowing bet. banks Prime Rate - the interest rate that banks charge their most credit-worthy customers Open Market Operations (OMO): Fed can either buy or sell bonds                                           * Sell bonds - Fe...

Fiscal Policy -changes in the expenditures or tax revenues of the fed. gov't 2 tools >> Taxes - gov't can increase or decrease taxes >>Spending - gov't can increase or decrease spending Inverse Relationship **enacted to promote our nation's economic goals: full employment, price stability, economic growth Deficits, Surpluses, and Debt * Balanced budget -Revenues = Expnditures *Budget deficit -Revenues < Expenditures *Budget surplus -Revenues > Expenditures *Gov't Debt - sum of all deficits - sum of all surpluses -Gov't must burrow money when it runs a budget deficit     *gov't burrows from: -Individuals -Corporations -Financial institution -foreign entities or foreign gov't Fiscal Policy Two Options * Discretionary Fiscal Policy (action) -Expansionary fiscal policy - think deficit -Contractionary - think surplus * Non-Discretionary -happens on its own without government input. Discretionary v. Auto...