3 Tools of Monetary Policy
There are three main tools of monetary policy – open market operations, reserve requirements, and the discount rate. These are decided by central banks such as the Federal Reserve.
Macroeconomics
3 Types of Fiscal Policy
There are three types of fiscal policy; neutral, expansionary, and contractionary.
A neutral policy refers to a balanced budget. In other words, government brings in enough taxation to pay for its expenditures.
Expansionary fiscal policy is where government spends more than it takes in through taxes.
Contractionary fiscal policy is where government collects more in taxes than it spends.
Exchange Rate Definition
An exchange rate is the value by which two currencies are swapped with each other. In other words, it is the rate or value at which one currency can purchase another currency.
Budget Deficit Definition
A budget deficit is where we spend more than we receive. If our monthly salary is $1,000, but we spend $1,100; our budget deficit is $100. This is because we are spending $100 more than we receive from our salary. Budgets deficits apply to any person or entity.
Comparative Advantage Definition
What is Comparative Advantage Comparative Advantage Examples Absolute Advantage vs Comparative Advantage How to Calculate Comparative Advantage Comparative Advantage Definition WRITTEN BY PAUL BOYCE | Updated 25 April 2022 What is Comparative Advantage Comparative advantage is where a nation is able to produce a product at a lower opportunity cost. In other words, a nation …
Central Bank Definition
A central bank controls the supply of money as well as how it reaches the consumer. It can not only print and inject money into the economy, but also regulate commercial banks distribution of it.
Dependency Ratio Definition
The dependency ratio is the percentage of children and those over 64 years old, compared to the people who are of working age. In other words, young and old people who are not in work, are dependent on the taxpayer to pay for public services. That includes public pensions, schooling, or other forms of social security.
Real GDP Definition
Real GDP is Gross Domestic Product (GDP) that accounts for inflation or deflation. In other words, it disregards the impact that higher prices have played in economic growth and allows us to compare the quantity of goods produced rather than the value.
Budget Surplus Definition
A budget surplus is where government brings in more money than it spends. In other words, it receives more in taxes than it spends on defence, welfare, or education.
Ceteris Paribus Definition
Ceteris Paribus is a phrase used in economics that makes economic analysis simpler. In essence, Ceteris Paribus means other things equal’. With regards to economics, it assumes that other influencing factors are held constant.
