Economy

Macroeconomics

Millions of actors interacting (aggregate view of interactions)

GDP

Inflation and Deflation

Unemployment

Frictional

Structural

Cyclical

Seasonal

Fiscal Policy: keep unemployment low and curb inflation

Contractionary

Increase taxes

Lower spending

Expansionary

Lower taxes

Increase spending

Monetary policy: keep unemployment low and curb inflation

Central bank

Determines the Required reserve ratio

Prints money

Defines interest rates

Issues bonds

Expansionary

More money in circulation

Contractionary

Less money in circulation

World trade

Bretton Woods Conference

IMF

World Bank

Fixed exchange rate (Dollar pegged to gold at a $35 per ounce rate)

1971 Nixon ended the convertibility from Dollar to gold

Foreign exchange market (Forex /FX)

Flexible exchange rate

Determined by supply and demand

Balance of trade

Value of exports X value of imports

Economic Stability

Foreign Exchange Stability

Job Creation and Industry Support

Sustainable Economic Growth

Geopolitical Influence and Economic Independence

Debt and Credit Management

Inflation Control

Financial market

Titles

Stock

Bond

Mutual

Hedge

Pension

Commodities

Microeconomics

Individuals making decisions using scarce resources

Laurence J Peter

"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today."

Scarcity

Scarce resource: give up something to get

Free resource: don't give up anything to get (oxygen, sunlight)

Rivalry

If one gets the good, it makes it impossible for others to get or significantly affects the ability to get or use it simultaneuously (spectrum)

Statements

Positive

Can be tested

Normative

Can't be tested

Factors of production

Land

Labor

Capital

Entrepreneurship

Technology

Types of economy

Command economy

Utopian fairness

No competition

Market economy

Inequality

Innovation

Incentives

Competition

Mixed economy spectrum

Some state/government ownership of some aspects of the economy

Production possibilities frontier (PPF)

Ceteris paribus

All things being equal

Opportunity cost

Giving up producing one good to produce more of another good

Increasing OC

Decreasing OC

Constant OC

Applies to everything

Measured in foregone benefits

Marginal cost

Applies to production

Measured in monetary terms (cost of additional production)

Comparative advantage

Absolute advantage

Price X Demand

Quantity demanded

Refers to a certain point on the curve

Demand

Refers to the entire curve

Shifts according to external factors, while the price is held constant

Normal goods

Demand goes up as income goes up

Inferior goods

Demand goes down as income goes up, and goes up as income goes down