Balance of Payments: Measure of Money inflows and outflows between US and rest if world; inflows referred as “credits” and outflows referred as “debits” Balance of Payment divided into 3 accounts: Current Account: Balance of Trade aka Net Exports, Net Foreign Income aka Net Investment: income earned by US owned by foreign assets, Net Transfers: foreign aid Capital/Financial Account: Includes purchase above real and financial access (ex: direct investment- in US, debit is credit to capital account; brand factory in area); direct investment by US firms/individuals in a foreign country are debits to capital account; purchase of foreign financial asset reps a debit to capital account (ex: rich buys stock in petral China); purchase of domestic product reps purchase of credit in financial account (ex: Venezuela buys steak from Venezuela); current and capital account should zero each other out; Real asset: real estate, G & Financial asset: stocks or bonds Official R...
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Disinflation: Reduction in the inflation rate from year to year which can be seen in the long run Phillips Curve; also occurs when AD declines Deflation: general decline in price level Hyperinflation: when an economy experiences an unusual high rate of inflation Supply Side Economics: Changes in AS not AD determines level of inflation, unemployment rates, economic growth; supporters believe it's best to lower taxes and decrease regulation; Reaganomics; lower tax rates provide positive work incentives and thus shift AS curve to right Reaganomics: poor gets money last Laffer Curve: depicts theoretical relationship between tax rates and government revenue; as tax rates increase from zero, tax revenues increase from zero to some maximum level and then decline; 3 criticisms: empirical evidence suggest that the impact of tax rates on incentives to work, save, and invest are small. Tax cuts also increase AD which can fill inflation; where economy is actually located on ...