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Unit 4: Macroeconomics: Production and Monetary Flows in the Economy by Mind Map: Unit 4: Macroeconomics: Production
and Monetary Flows in the Economy
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Unit 4: Macroeconomics: Production and Monetary Flows in the Economy

FISCAL POLICY

Expansionary Fiscal Policy

Cut taxes

Increase government spending

Contractionary Fiscal Policy

Increase taxes

Decrease government spending

Automatic Stabilizers

Drawback

Time lags

Recession period > Recovery period

Cyclical Balanced Budgets

Business cycle to make fiscal decisions

Government intervention

MACROECONOMICS

Key Measures of Performance

Output

Employment Levels

Price Stability

GDP

Income Approach, Income of Household, Income of Businesses, Income of Government

Expenditure Approach, GDP= C + I + G + (X-M)

INCOME GDP = EXPENDITURE GDP

Does not account for, Inflation, Household Production, Illegal Production, Leisure Time, Quality of Life

GNP

Unemployment

Rate, Unemployment Rate = (# unemployed)/(labour force) x 100, Employment Rate = (# employed)/(labour force) x 100

Limitations, Underemployment, Discouraged workers, Dishonesty

Types, Frictional, Seasonal, Structural, Cyclical

Measurement, Full Employment, Okun's Law, GDP gap = current GDP x ((current UE rate-FE rate) x 2)/100

Inflation

Measurement, Consumer Price Index, Limitations, Consumption, Spending Patterns, Improvements, CPI = (Current Year Cost of Basket)/(Base Year Cost of Basket) x 100

Types, Demand-Pull Inflation, Cost-Push Inflation

BUSINESS CYCLE

Economic Growth and Recession

Recovery: First part of the expansionary period

Peak: High inflationary pressure

Recession: Real GDP growth is negative

Depression: Prolonged recession

Trough: Economic activity does not decrease

Economist: John Maynard Keynes

MONEY

History

Commodities

Coinage

Paper receipts

Paper currency

Function: exchange, measure and value

Characteristics: Portable, durable, divisible, distinguishable, limited, hard to counterfeit

Currency

Exchange Rates

Conversions

Baking Systems

Branch banking

Unit banking

Chartered banks

Central Banks, Bank of Cnaada

Interest Rates

Prime Rate

Bank Rate, Bank of Canada Rate, Overnight Rate

MONETARY POLICIES

Interest Rates

Affects on Demand

Affects on Supply

Government

Makes sure Canada has money for goods and services

Easy Money Policy

Problem: Recession

Stage 1: BoC increases reserves - interest rates decrease

Stage 2: consumer and business spending increases

Stage 3: money supply growth increases

Stage 4: GDP increases

Tight Money Policy

Problem: High Inflation

Stage 1: BoC decreases reserves - interest rates increase

Stage 2: consumer and business spending decreases

Stage 3: money supply growth decreases

Stage 4: GDP decreases

GRAPHS

Philips Curve

Business Cycle

Aggregate Demand

Aggregate Supply