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NET EXPORTS OF GOODS AND SERVICES: The official item in the National Income and Product Accounts maintained by the Bureau of Economic Analysis measuring net exports by the foreign sector. Net exports of goods and services is the smallest of the four expenditures, averaging around 2% of gross domestic product. Unlike the other expenditures, net exports of goods and services can be either positive or negative. They are positive when exports are greater than imports and negative when exports are less than imports. In recent years, net exports of goods and services have been negative.

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Lesson 18: Banking | Unit 4: Regulating Banks Page: 18 of 24

Topic: Why? <=PAGE BACK | PAGE NEXT=>

Banking is a heavily regulated industry.

Reasons:

  • First: Banks have the temptation to go for large profits at the expense of protecting deposits.
  • Second: The economy's health rests with having the 'correct' money supply.

The problems:

  • Banks get carried away seeking profits without having enough deposit-protecting reserves.
  • Customers can't withdraw deposits and lose trust.
  • Banks shut down, remaining bank deposits become worthless, and the money supply shrinks.
  • The economy heads into a recession.

Important points:

  • A failed bank is bad for the economy.
  • Government can control the checking account part of money only by controlling and regulating banks.

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AGGREGATE DEMAND DECREASE, SHORT-RUN AGGREGATE MARKET

A shock to the short-run aggregate market caused by a decrease in aggregate demand, resulting in and illustrated by a leftward shift of the aggregate demand curve. A decrease in aggregate demand in the short-run aggregate market results in a decrease in the price level and a decrease in real production. The level of real production resulting from the shock can be greater or less than full-employment real production.

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Today, you are likely to spend a great deal of time at a crowded estate auction hoping to buy either a box of multi-colored, plastic paper clips or several orange mixing bowls. Be on the lookout for pencil sharpeners with an attitude.
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Junk bonds are so called because they have a better than 50% chance of default, carrying a Standard & Poor's rating of CC or lower.
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