Monetary Policy and Central Banks

Definition: The actions of a central bank to control the money supply and interest rates to promote economic growth, stability, and low inflation.
Tools:
- Open market operations (buying or selling government securities)
- Reserve requirements (setting the minimum amount of reserves banks must hold)
- Discount rate (the interest rate at which banks borrow from the central bank)
Objectives:
- Price stability (low inflation)
- Maximum employment
- Moderate long-term interest rates

Definition: The exchange of goods and services across national borders.
Types of trade:
- Free trade: unrestricted trade between countries
- Protectionism: trade restrictions to protect domestic industries
Theories:
- Absolute advantage: a country has a lower opportunity cost in producing a good
- Comparative advantage: a country has a lower opportunity cost in producing a good relative to another country
Gains from trade:
- Increased efficiency
- Increased variety of goods and services
- Lower prices

Definition: The study of individual economic units, such as households, firms, and markets.
Key concepts:
- Opportunity cost: the value of the next best alternative forgone
- Supply and demand: the price at which the quantity of a good or service supplied equals the quantity demanded
- Elasticity: the responsiveness of the quantity demanded or supplied to changes in price or other factors
Market structures:
- Perfect competition: many firms producing a homogeneous product
- Monopoly: a single firm producing a product
- Oligopoly: a few firms producing a product

Definition: The study of the economy as a whole, including issues such as economic growth, inflation, and unemployment.
Key concepts:
- Gross domestic product (GDP): the total value of goods and services produced within a country
- Aggregate demand: the total amount of goods and services demanded in the economy
- Aggregate supply: the total amount of goods and services supplied in the economy
Macroeconomic goals:
- Economic growth
- Low inflation
- Full employment

Definition: The use of government spending and taxation to influence the overall level of economic activity.
Fiscal policy tools:
- Government spending: increasing or decreasing government expenditures
- Taxation: changing tax rates or laws to increase or decrease government revenue
Fiscal policy objectives:
- Stimulating economic growth during a recession
- Reducing inflation during a boom
- Reducing budget deficits or debt

Definition: The number of people able and willing to work, but unable to find employment.
Types of unemployment:
- Frictional unemployment: temporary unemployment due to job search or transition
- Structural unemployment: unemployment due to a mismatch between job skills and available jobs
- Cyclical unemployment: unemployment due to economic downturns
Measuring unemployment:
- Unemployment rate: the number of unemployed as a percentage of the labor force
- Labor force participation rate: the percentage of the population employed or actively seeking employment

Monetary policy is used to control the money supply and interest rates to promote economic growth, stability, and low inflation.
The central bank uses three main tools: open market operations, reserve requirements, and the discount rate.
The objectives of monetary policy are to maintain price stability, maximize employment, and achieve moderate long-term interest rates.

International trade is the exchange of goods and services across national borders.
There are two types of trade: free trade (unrestricted trade between countries) and protectionism (trade restrictions to protect domestic industries).
The theories of international trade include absolute advantage (a country has a lower opportunity cost in producing a good) and comparative advantage (a country has a lower opportunity cost in producing a good relative to another country).
The gains from trade include increased efficiency, variety of goods and services, and lower prices.

Microeconomics is the study of individual economic units, such as households, firms, and markets.
Key concepts in microeconomics include opportunity cost (the value of the next best alternative forgone), supply and demand (the price at which the quantity of a good or service supplied equals the quantity demanded), and elasticity (the responsiveness of the quantity demanded or supplied to changes in price or other factors).
There are several market structures, including perfect competition (many firms producing a homogeneous product), monopoly (a single firm producing a product), and oligopoly (a few firms producing a product).

Macroeconomics is the study of the economy as a whole, including issues such as economic growth, inflation, and unemployment.
Key concepts in macroeconomics include gross domestic product (GDP) (the total value of goods and services produced within a country), aggregate demand (the total amount of goods and services demanded in the economy), and aggregate supply (the total amount of goods and services supplied in the economy).
The macroeconomic goals include economic growth, low inflation, and full employment.

Fiscal policy is the use of government spending and taxation to influence the overall level of economic activity.
The fiscal policy tools include government spending (increasing or decreasing government expenditures) and taxation (changing tax rates or laws to increase or decrease government revenue).
The fiscal policy objectives include stimulating economic growth during a recession, reducing inflation during a boom, and reducing budget deficits or debt.

Unemployment is the number of people able and willing to work, but unable to find employment.
There are three types of unemployment: frictional unemployment (temporary unemployment due to job search or transition), structural unemployment (unemployment due to a mismatch between job skills and available jobs), and cyclical unemployment (unemployment due to economic downturns).
Unemployment can be measured using the unemployment rate (the number of unemployed as a percentage of the labor force) and the labor force participation rate (the percentage of the population employed or actively seeking employment).