Unit 6

Question 1

balance of payments

Answer 1

summary of a nation’s international trade. It is made up of current account (CA) and capital and financial account (CFA)

Question 2

What is current account made up of (3)

Answer 2

-trade (net exports)
-investment income
-net transfers

Question 3

investment income

Answer 3

money earned by doing business elsewhere

Question 3

what are net transfers?

Answer 3

money flowing from one country to another

Question 4

capital and financial account (CFA)

Answer 4

measures the purchase and sale of financial assets abroad

Question 5

foreign direct investment

Answer 5

foreign companies buy businesses abroad

Question 6

net capital outflow

Answer 6

difference between the purchase of foreign assets and domestic assets

Question 8

Capital Stock

Answer 8

Item that can produce more goods

Question 9

Stagflation

Answer 9

Both inflation and unemployment are rising

Question 10

Supply shock

Answer 10

Event that suddenly increases/decreases the supply of a good or service

Question 11

Autonomous consumption

Answer 11

Expedientares consumers make even when their disposable income is 0

Question 12

Crowding out

Answer 12

Increased interest rates causes a reduction in investment spending

Question 13

Velocity of money

Answer 13

Rate at which money is exchanged in an economy

Question 14

Demand deposits

Answer 14

Funds held in an account that can be withdrawn at any time

Question 15

Excess reserves

Answer 15

Money held by a bank beyond what is required by the reserve requirement

Question 16

Federal funds rate

Answer 16

Interest rate banks charge other banks

Question 17

Leakages

Answer 17

Capital/income that escapes an economy in terms of the circular flow

Question 18

Fiat money

Answer 18

Medium that serves as currency but has no other intrigaron value

Question 19

Foreign direct investment

Answer 19

Purchase of an asset in another country

Question 20

Infrastructure

Answer 20

Structure within an economy that facilitates the economic activity of bridges, roads, railroads,etc

Question 21

Opportunity cost

Answer 21

Loss of potential gain from alternatives when one choice is made

Question 22

Trade offs

Answer 22

What you give up in a choice

Question 23

Nominal gdp

Answer 23

GDP not adjusted for inflation

Question 24

Real GDP

Answer 24

Adjusted for inflation

Question 25

Nominal interest rate

Answer 25

The actual interest rate paid

Question 26

Real interest rate

Answer 26

Rate adjusted for inflation (includes just the expected inflation)

Question 27

Labor force

Answer 27

All members of a population that are able to work

Question 28

Inflation rate

Answer 28

Rate of increase of prices in a given period of time

Question 29

CPI

Answer 29

A measure of the average change in price of a good over time

Question 30

Equilibrium

Answer 30

AD Equals AS

Question 31

Exchange rate

Answer 31

Price of one currency relative to another currency

Question 32

FOREX Shifters

Answer 32

-change in tastes
-change in relative income
-change in relative price level
-change in relative interest rates

Question 33

What do the following phrases indicate
-silver per gold
-silver price in gold
-value of gold per silver

Answer 33

Exchange rate