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Economy - Economy is the wealth and resources of a country or region,…

- - - - Frictional Unemployment - Between jobs/ Fired
      - Structural Unemployment - Workers are replaced by Technology
      - Unemployment rate- The percent of population that is looking for a job and cant find one. Calculated Number of unemployed / employed +unemployed
      - Cyclical Unemployment - Government tries to avoid. Something bad going around and everyone gets fired
    - - Primary Sector - The part of economy in which activities revolve around getting raw material from earth (Farming, Fishing, Mining)
      - Secondary Sector - Secondary economic activities deal with processing raw materials acquired through primary sources
      - Tertiary Sector - Anyone who sells anything
      - Underground sector - All the illegal production of goods and services (Drug Dealing)
    - - Business Cycle - One business cycle is comprised of expansion and Contraction
      - Expansion - Business is booming! economy grows faster than average
      - Contractionary - Real GDP in decline (2 consecutive quarters = Recession)
      - Fiscal Policy - Changes in government spending and taxes to fight recession or inflation (Good and Bad Times)
        
        Marginal Propensity to consume (MPC) - How much is spent out an extra dollar of income
        
        Fiscal Policy multipliers - Government changes to taxes and spending have magnified effect on the overall economy
        
        Expansion vs Contractionary Fiscal policy -
        
        Expansionary- Used to fight recession, High unemployment
        
        Contraciontary- Used to fight inflation (rising prices) Prevent the economy from overheating - Involves decreasing gov spending and raising taxes to lower deficits and reduce gov. debt
        
        Debt vs Deficit
        
        Debt- Money that is owed
        
        deficit- Government spending
        
        Monetary Policy
        
        Contractionary- Contractionary monetary policy is a form of economic policy used to fight inflation which involves decreasing the money supply in order to increase the cost of borrowing which in turn decreases GDP and dampens inflation
        
        Expansionary - when a central bank uses its tools to stimulate the economy.
        
        Fiat Money - Currency with nothing else backing it up, except for the fact that its legal tender
        
        Gold Standard - the system by which the value of a currency was defined in terms of gold, for which the currency could be exchanged. The gold standard was generally abandoned in the Depression of the 1930s.
        
        Functions of money
        
        Unit of exchange - When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions.
        
        Unit of account - The value of something is measured in a specific currency. This allows different things to compared against each other; for example, goods, services, assets, liabilities, labor, income, expenses. It lends meaning to profits, losses, liability, or assets.
        
        Store of value - the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved. More generally, a store of value is anything that retains purchasing power into the future
        
        Fractional reserve banking & the money supply - the common practice by commercial banks of accepting deposits, and making loans or investments, while holding reserves at least equal to a fraction of the bank's deposit liabilities. Reserves are held as currency in the bank, or as balances in the bank's accounts at the central bank.
        
        Federal reserve - is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.
        
        How its organized - is made up of twelve members including all seven members of the Board of Governors, the New York Fed President, and four Reserve Bank presidents, who serve on a rotating basis.
        
        Dual Mandate - promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates
        
        Tools the Fed Use to control money supply
        
        Reserve requirement - The Federal Reserve requires banks and other depository institutions to hold a minimum level of reserves against their liabilities. Currently, the marginal reserve requirement equals 10 percent of a bank's demand and checking deposits.
        
        Discount rate - The Federal Reserve requires banks and other depository institutions to hold a minimum level of reserves against their liabilities. Currently, the marginal reserve requirement equals 10 percent of a bank's demand and checking deposits.
        
        Open market operations - Open market operations consists of the buying or selling of government securities. The Fed holds government securities, and so do individuals, banks, and other financial institutions such as brokerage companies and pension funds.
        
        Paying interest and taxes on excess reserves - intended to eliminate effectively the implicit tax that reserve requirements used to impose on depository institutions.
        
        2009 recession -
        
        Credit default swap - A credit default swap is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default or other credit event. That is, the seller of the CDS insures the buyer against some reference asset defaulting.
        
        Mortgage Backed security - The mortgages are sold to a group of individuals that securitizes, or packages, the loans together into a security that investors can buy.
        
        Cons - Some of these loans are a mix of really good buyers and risky buyers but are labeled as low risk buyers
        
        Pros - People can make money off of it if people fail to pay their mortgages
        
        Differing Philosophies
        
        Keynes vs Hayek
        
        Keynes Believed in using the monetary and fiscal policy
        
        Hayek promoted the idea that private investment, rather than government spending
        
        Animal Spirits - The General Theory of Employment, Interest and Money, animal spirits describes the human emotion that drives consumer confidence.
        
        Paradox of Thrift - The paradox states that an increase in autonomous saving leads to a decrease in aggregate demand and thus a decrease in gross output which will in turn lower total saving
        
        Fiscal and Monetary Policy (Sugar High) - When a monetary policy takes place the government boosts the economy by putting money into the economy. Increasing money flow will only create a temporary boost creating the "Sugar high"
- - - - Number of sellers
      - Prices of Resources
      - Technology
    - - Taste and Preference
      - Price of Related goods
      - Income
    - - Price Ceilings - Low and control the market from prices being too low
      - Price floors - Stops pricing from getting to equilibrium