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INDUCED NET EXPORTS: Net exports by the foreign sector that depend on income or production (especially national income and gross domestic product). That is, changes in income induce changes in net exports. Induced net exports reflect the induced relation between imports and income, which means net exports decline as income increases. They are measured by the negative of the marginal propensity to import (MPM) and are reflected by the negative slope of net exports line. The alternative to induced net exports is autonomous net exports, which do not depend on income.

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Lesson 20: Federal Reserve System | Unit 4: Monetary Policy Page: 12 of 20

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The Federal Reserve controls banks as a means of controlling the money supply.

A more specific definition:

Monetary policy is controlling the money creation activity of the fractional-reserve banking system to control deposits and the money supply to affect business-cycle fluctuations.

Early tasks of the Fed:

  • To keep banks in business and to avoid serious reductions in bank reserves that would shrink financial wealth and money supply.

    What the Fed does now:

  • Manipulate the money supply by manipulating reserves.

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EXCESS RESERVES

The reserves (vault cash and Federal Reserve deposits) that banks have over and above what they are required by government to keep to back up deposits. The primary use of excess reserves, also termed free reserves, is for loans to consumers and businesses. Because reserves do not generate interest, revenue, or profit, banks are inclined to keep as few excess reserves as possible.

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Today, you are likely to spend a great deal of time strolling around a discount warehouse buying club seeking to buy either a brown leather attache case or car battery jumper cables. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
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Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
"The greatest barrier to success is the fear of failure."

-- Sven Goran Eriksson, writer

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North America Free Trade Agreement
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