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SLOPE, AGGREGATE DEMAND CURVE: The aggregate demand curve has a negative slope, reflecting the inverse relation between the price level and aggregate expenditures on real production. A higher price level is related to fewer aggregate expenditures and a lower price level is related to greater aggregate expenditures. The three reasons underlying the negative slope of the AD curve and the inverse relation between the price level and aggregate expenditures on real production are: real-balance effect; interest-rate effect; and net-export effect.
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Lesson 20: Federal Reserve System | Unit 2: What It Does
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Page: 4 of 20
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The Fed is responsible for ensuring that the economy has the proper amount of money in circulation.- In the old days, governments controlled the money supply by printing and minting money.
- In modern times, with bank checkable deposits in the money supply, the Fed controls money by controlling banks.
Two reasons: - First: Too much money causes inflation and too little money leads to recession and unemployment. The challenge is to keep enough money in circulation.
- Second: Money is absolutely essential in a modern complex economy. Faith in the value of fiat money is best provided by a centralized, national government that has the authority to ensure the value of money.
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IMPORT QUOTAS Quantity restrictions imposed by the government of one nation on imports from other nations. The primary goal of import quotas is to reduce imports and increase domestic production. Because the quantity of imports is restricted, the price of imports increases, which thus encourages domestic consumers to buy more domestic production. Import quotas are one of three common foreign trade policies designed to discourage imports and/or encourage exports. The other two are tariffs and export subsidies.
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GREEN LOGIGUIN
[What's This?]
Today, you are likely to spend a great deal of time going from convenience store to convenience store looking to buy either a birthday greeting card for your grandmother or a coffee cup commemorating yesterday. Be on the lookout for jovial bank tellers.
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Only 1% of the U.S. population paid income taxes when the income tax was established in 1914.
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"It is not because things are difficult that we do not dare; it is because we do not dare that they are difficult. " -- Seneca, statesman, dramatist, philosopher
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SBDC
Small Business Development Center
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