Understanding the Macro Economy: Part II

This set of flashcards covers key concepts related to international political economy, financial markets, and macroeconomic principles.

International Political Economy

The study of the interactions between international politics and international economics.

IMF

International Monetary Fund, an organization that aims to promote global economic growth and stability.

Capital Controls

Government measures that restrict the flow of foreign capital in and out of the domestic economy.

Economic Sovereignty

The ability of a state to control its own economic policies without external interference.

Trade Balance

The difference between the value of a country's exports and imports.

Current Account

A component of a country's balance of payments that records all transactions related to goods, services, income, and current transfers.

Balance of Payments (BoP)

A statement that summarizes a country's financial transactions with the rest of the world.

Exchange Rate

The price of one currency in terms of another currency.

Demand Deposits

Funds held in an account from which deposited funds can be withdrawn at any time without any notice.

Monetary Aggregates

Measures of the money supply in an economy categorized into different types of money based on liquidity.

Nominal Interest Rate

The interest rate before adjustment for inflation; it is the stated interest rate.

Real Interest Rate

The nominal interest rate adjusted for inflation.

Liquidity Trap

A situation where monetary policy becomes ineffective because interest rates are already at or near zero.

Paradox of Thrift

An economic theory that argues increased saving can lead to a decrease in overall spending, thus reducing economic growth.

Central Bank Independence (CBI)

A scenario where the central bank operates independently of the government to avoid political influences on monetary policy.