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Macroeconomics (Goals (Economic Growth, Stable price level (1-3% inflation…
Macroeconomics
Goals
Economic Growth
Stable price level (1-3% inflation rate)
Full employment
Equitable distribution of income
Balance the balance of payments
Trade
Balance of Payments
Current Account Balance
Balance on goods
Balance on income
Balance on transfers
Balance on services
Terms of Trade
Px/Pm x index
Ratio of exports to imports
Shows purchasing power of exports
Not about quantity
Foreign Exchange Market
Exchange rate
Floating
Supply
Have NZD
Want to trade NZD
Demand
Have foreign currency
Want to trade for NZD
Trade Weighted Index
Value of NZD against trading partners
Weights depending on proportion of trade
Fiscal Policy
Government's spending
Influence economic activity
AS/AD
Aggregate Demand
Consumption
Investment
Government Spending
Net exports
Aggregate Supply
Costs of production
Profitability
Yf = Full employment
Starts with low gradient, goes to high gradient
Monetary Policy
Goal is to control inflation
OCR
Influences short-term interest rates for lending
Controls AD
Changes inflation
Lowest interest rate in economy