Macroeconomics
Complements: Goods consumed with each other, such as printers and ink cartridges. Commercial bank: Privatefnancialinstitutions that serve households and frms by accepting depositsandprovidingloansandotherbanking services. Commodity-backed money: Money that derives its power from a commodity that is of value, such as currency backed by silver. Commoditymoney: Itemsusedasmoneywhile alsohavingintrinsicvalueinotheruses,suchas gold. ConsumerPriceIndex(CPI): Ameasureofthe averagechangeinthepricesofarepresentative basket of products bought byhouseholds.Itis usedtoassesschangesinthecostoflivingand inflation. Consumption (C): Households’ spending on goods and services. Contractionary fscal policy: An economic policy implemented by the government to reduce aggregate demand by reducing government spending and increasing taxes. Contractionary/tight monetary policy: An economic policy implemented by the central bank to decrease moneysupplyandshrinkthe economy by raising interest rates. Contraction of demand: A decrease in the quantity demanded of a productreflectedbya movement up the demand curve. Contraction of supply: A decrease in the quantity supplied of a product reflected by a movement down the supply curve. Cost-push inflation: Inflation caused by a general increase in the costs of production.
goods and services. Example: forklifts and computers. Capital and fnancial account (CFA): An account on the balance of payments that records international transactionsthatcreatea liability for the country including capital flows, direct investments, and ownership of non-produced and fnancial assets. Capital and fnancial account defcit: When capital outflows exceed capital inflows on the capital and fnancial account of the BOP. Capital and fnancial account surplus: When capital inflows exceed capital outflows on the capital and fnancial account of the BOP. Capital inflows: Financial capital entering the country from abroad. Capital outflows: Financial capital leaving the country. Central bank: The government’s bank responsible for controlling thefnancialsystem and conducting monetary policy. Centralbankautonomy: Theabilityofacentral bank to act in an economy independently of government intervention. Ceteris paribus: Other things held equal or constant. Choice: Choosing alternatives when resources are scarce. Closed economy: An economic model that assumes a country does not engage in international trade. Comparativeadvantage: Theabilitytoproduce a good or service at a lower opportunity cost than another producer or economy.
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