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December 13, 2018 

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CAPITAL ACCOUNT: One of two parts of a nation's balance of payments. The capital is a record of all purchases of physical and financial assets between a nation and the rest of the world in a given period, usually one year. On one side of the balance of payments ledger account are all of the foreign assets purchase by our domestic economy. On the other side of the ledger are all of our domestic assets purchased by foreign countries. The capital account is said to have a surplus if a nation's investments abroad are greater than foreign investments at home. In other words, if the good old U. S. of A. is buying up more assets in Mexico, Brazil, and Hungry, than Japanese, Germany, and Canada investors are buying up of good old U. S. assets, then we have a surplus. A deficit is the reverse.

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Lesson Contents
Unit 1: The Concept
  • What It Is
  • Circular Flow
  • Unit 1 Summary
  • Unit 2: Doing More
  • Expenditures
  • Consumption Expenditures
  • Investment Expenditures
  • Government Purchases
  • Net Exports
  • Unit 2 Summary
  • Unit 3: The Curve
  • Highlights
  • Slope
  • Real-Balance Effect
  • Interest-Rate Effect
  • Net-Export Effect
  • Unit 3 Summary
  • Unit 4: Determinants
  • Instability
  • Shifts: Increase
  • Shifts: Decrease
  • Unit 4 Summary
  • Unit 5: Policies Plus
  • Business Cycles
  • Policies
  • Unit 5 Summary
  • Course Home
    Aggregate Demand

    This lesson introduces aggregate demand, the demand-side of the aggregate market. The aggregate market is the key model used to explain and analyze the workings of the macroeconomy and aggregate demand is a critical half of this model (the other is aggregate supply). Taking a clue from market demand, this lesson examines the nature of aggregate demand, including the relation between the price level and aggregate expenditures, the reason the aggregate demand curve is negatively sloped, and the assorted aggregate demand determinants that cause the aggregate demand curve to shift.

    • The first unit of this lesson introduces the concept of aggregate demand and how it fits into the study of macroeconomics in terms of the aggregate market and circular flow.
    • In the second unit, we example the four aggregate expenditures -- consumption, investment, government purchases, and net exports -- the make up aggregate demand.
    • The third unit then examines the aggregate demand curve that captures the aggregate demand relation between the price level and aggregate expenditures, especially the importance of the real-balance, interest-rate, and net-export effects.
    • A look at the assorted aggregate demand determinants that shift the aggregate demand curves is the topic of the fourth lesson.
    • We end this lesson in the fifth unit with a look how demand-management policies work to stabilize business cycles through aggregate demand.

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    MONETARY POLICY TARGETS

    Values of specific economic variables that the monetary authority seeks achieve with monetary policy. The three most noted monetary policy targets are interest rates, monetary aggregates, and exchange rates. These targets are usually intermediate targets that can be quickly achieved and easily measured, but then move the economy toward the ultimate macroeconomic goals of full employment, stability, and economic growth.

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    Today, you are likely to spend a great deal of time at a flea market trying to buy either a 200-foot blue garden hose or a video camera with stop action features. Be on the lookout for poorly written technical manuals.
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    In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
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    -- Peter F. Drucker, author

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