Open Economy Macroeconomics
Terms
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- who are the 4 players in an open macroeconomic economy?
- Households, businesses, government, and foreigners
- what makes up aggregate demand?
- consumption expenditure, investment expenditure, governemtn expenditure (all on final goods), and net exports
- what determines aggregate demand?
- disposable income, but to a lesser extent wealth and real interest rates play a minor role as well
- what determins the current account?
- the real exchange rate is the biggest, but also disposable income
- what is aggregate supply?
- the total output of an economy
- Intermediate Inputs
- Parts and materials that are incorporated into a final good.
- Aggregate Demand Curve
- The graphical relationship between the total quantity demanded of goods and services and the price level.
- Aggregate Supply Curve
- The graphical relationship between the nation’s output and the price level.
- what are the two types of macroeconomic policies?
- fiscal and monetary
- Fiscal policy is...
- Measures or policies relating to taxation and government expenditures.
- Multiplier Effect
- A change in spending has an impact on national product that is ultimately larger than the initial magnitude of spending change. The total impact is a multiple of the initial change.
- Monetary Policy
- Policies relating to money supply and interest rate.
- Open Market Operations
- The principal measure of monetary policy, consisting of the purchase and sale of treasury bills, notes and bonds designed to influence bank reserves and interest rates.
- who implements monetary policy in the united states?
- the US central bank does!
- who implements fiscal policy?
- much more complicated but congress must pass laws