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NOMINAL WAGE: The market wage paid to labor stated in current prices. This is the actual wage received by labor for performing productive work. The contrast is with real wage, which is nominal wage adjusted for inflation. Nominal wage is comparable to other nominals, including nominal gross domestic product.

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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

The total real expenditures on final goods and services produced in the domestic economy that buyers are willing and able to undertake at different price levels, during a given time period (usually a year). Aggregate demand, usually abbreviated AD, is an inverse relation between price level and aggregate expenditures. This is one half of the AS-AD (aggregate market) analysis. The other half is aggregate supply. Aggregate demand consists of four aggregate expenditures--consumption expenditures, investment expenditures, government purchases, and net exports--made by the four macroeconomic sectors--household, business, government, and foreign.

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Today, you are likely to spend a great deal of time touring the new suburban shopping complex looking to buy either a how-to book on meeting people or clothing for your pet iguana. Be on the lookout for a thesaurus filled with typos.
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The 22.6% decline in stock prices on October 19, 1987 was larger than the infamous 12.8% decline on October 29, 1929.
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