by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Circular Flow Model? A good model to start with in economics is the circular flow diagram. It pictures the economy as consisting of two groups—households and firms—that interact in two markets: the goods and services market in which firms sell and...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a National Saving and Investment Identity? The national saving and investment identity provides a useful way to understand the determinants of the trade and current account balance. In a nation’s financial capital market, the quantity of financial capital...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Standard of Deferred Payment? Finally, another function of money is that it must serve as a standard of deferred payment. This means that if money is usable today to make purchases, it must also be acceptable to make purchases today that the purchaser will...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Unit of Account? Third, money serves as a unit of account, which means that it is the ruler by which we measure values. For example, an accountant may charge $100 to file your tax return. That $100 can purchase two pair of shoes at $50 a pair. Money acts as...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Unit of Account?Third, money serves as a unit of account, which means that it is the ruler by which we measure values. For example, an accountant may charge $100 to file your tax return. That $100 can purchase two pair of shoes at $50 a pair. Money acts as...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Medium of Exchange? First, money serves as a medium of exchange, which means that money acts as an intermediary between the buyer and the seller. Instead of exchanging accounting services for shoes, the accountant now exchanges accounting services for money....
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Double Coincidence of Wants? In an economy without money, an exchange between two people would involve a double coincidence of wants, a situation in which two people each want some good or service that the other person can provide. For example, if an...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Frictional Unemployment? In a market economy, some companies are always going broke for a variety of reasons: old technology; poor management; good management that happened to make bad decisions; shifts in tastes of consumers so that less of the firm’s product...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Cyclical Unemployment? Let’s make the plausible assumption that in the short run, from a few months to a few years, the quantity of hours that the average person is willing to work for a given wage does not change much, so the labor supply curve does not shift...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Twin Deficits?Twin deficits refers to the situation where a country has both a budget deficit and a trade deficit at the same time. Back to:ECONOMIC ANALYSIS & MONETARY POLICYRelated Topics What is Government Spending? Autonomous Spending Autonomous...
