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FEDERAL RESERVE DEPOSITS: Deposits that commercial banks keep with the Federal Reserve System. Federal Reserve deposits, together with vault cash are the bank reserves that banks use to back up customers' deposits and otherwise conduct daily transactions, such as processing checks and satisfying customers cash withdrawals. Federal Reserve deposits play three key roles in the banking system. One, they are used by the Federal Reserve system to process of clear checks. Two, they are loaned between commercial banks through the federal funds market. Three, they are used by the Federal Reserve System to control the money supply.
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Lesson 9: Macro Basics | Unit 1: The Macroeconomy
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Let's start with a definition: An economy is an interactive system of production, distribution, and consumption of resources, goods, and services that addresses the basic economic problem of scarcity. - Economic functions are divided into four basic macroeconomic sectors:
- Household: the consumers.
- Business: the producers.
- Government: the regulators and taxers.
- Foreign: the others.
The household sector of the macroeconomy is everyone in an economy who consumes goods and services.- Consumption is the use of natural resources, goods, or services to satisfy wants and needs.
- In a complex economy, consumption is expenditures by the household sector for the purchase of final goods and services.
- Household sector is a term that indicates the consuming, wants-and-needs-satisfying population. Everyone in society is included in the household sector.
The household sector is responsible for consumption.The business sector of the macroeconomy produces the goods and services that are consumed by the household sector. - The business sector is responsible for production by combining the four basic resources: labor, capital, land, and entrepreneurship.
- A business is a method of combining resources for production.
- While the business sector buys raw materials, intermediate goods, and other things. The most important purchase of the business sector is capital goods, or investment in capital.
The business sector is responsible for capital investment.The government sector affects resource allocation and production by imposing laws and regulations that force decisions not otherwise made. - Three levels of government: Federal, State and Local.
- The government sector collects taxes and buys a share of the economy's production, termed government purchases. These are goods such as national defense, highway and street construction, education, and police protection.
- Government purchases do not include transfer payments (Social Security benefits, welfare or unemployment compensation).
The government sector is responsible for government purchases.Economic activity is divided into domestic, everything within the political boundaries of a nation, and foreign, everything outside the boundaries. - Any citizen of the U.S., any firm owned by a U.S. citizen, and the government of any U.S. city are part of the domestic economy.
- Any resident, business or government of another country is part of the foreign sector.
- Exports are goods purchased by the foreign sector that are produced by the domestic economy.
- Imports are goods purchased by the domestic economy that are produced by the foreign sector.
- Net exports are the difference between exports and imports, or exports minus imports.
The foreign sector is responsible for net exports.
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COST OF LIVING The amount of income or money needed to acquire a given quantity of goods and services or to achieve a given living standard. This cost of living notion is closely intertwined with inflation, the economy's price level, and the concept of purchasing power.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time at a garage sale hoping to buy either pink cotton balls or a genuine down-filled comforter. Be on the lookout for celebrities who speak directly to you through your television.
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The average length of a "business lunch" is about 36 minutes.
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"The time to repair the roof is when the sun is shining." -- John F. Kennedy, 35th U. S. president
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JEP
Journal of Economic Perspectives
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