Caproasia

Economics Terms

Economics
The study of how to work with given resources.

Home Economics
The study of how housewives work with limited money in a small apartment, hungry husband, naughty kids, limited salt, eggs, oil and rice.

Demand
What people want

Supply
What is being produced

Demand & Supply
What people want and what is being produced

Equilibrium
What people want and what is being produced match, at a certain price.

GDP
The total value of goods or services created. It stands for Gross Domestic Product.

Nominal
Current value or market value

Real
Value adjusted for inflation

Inflation
Value or price going up

Deflation
Value or price going down

Macroeconomics
When your mum gives you $200 a month or $2400 a year, you decide how to spend it.

Microeconomics
You spend $2 today. Count the cents and dollars to know what you have spend this month or this year.

Econometrics
Using complex math to explain economics

Adam Smith
An influential thinker in economics. Considered as the “Father of modern economics”
Check his photo
Check his book

Philips Curve
Using complex math to explain economics

Keynesian Economics
When demand and supply goes wrong, government should step in: Reduce interest rate and increase infrastructure spending. By John Maynard Keynes.
Check his photo
Check his book

Classical Economics
How markets and economies work. Freedom, laissez-faire and free competition promotes growth.
Thinkers: Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill.

Neo-Classical Economics
How a person maximise profits or returns by understanding demand and supply.

Fisher’s Equation
Where nominal interest interest rate = inflation rate and real interest rate. Named after Irving Fisher

Lucas Critic
Naive to predict how government macro-policies will impact economy by using past datas.

Fiscal policy
Government tax and spending policies.

Expansionary: Less tax and more spending = more money in use
Contractionary: More tax and less spending = less money in use
Neutral: In-between

Monetary Policy
Government controlling money supply. Using interest rate, targeted inflation rate or currency exchange rate.

Multiplier Effect
How many times money will change hands.

High: Father gives $10 to Mummy. Mummy gives $10 to daughter. Sister lends $10 to brother. Brother lends $10 to his friend. Friend spends $10 on buying toy. Toy shop owner pays supplier. Supplier pays distributor …..

Low: Father gives $10 to Mummy. Mummy drops $10 into piggy bank. Son and daughter look at the piggy bank for 20 years.

Money Supply
Amount of money in the system.
M1 ~ Money that can be used very quickly

More
M0 ~ Notes and Coins available
MB ~ Notes and Coins available and in bank vault + Reserves
M1 ~ Notes and Coins available + Non-banks travellers check + fixed deposits + deposits with chequebooks + savings
M2 ~ Notes and Coins available + Non-banks travellers check + fixed deposits + deposits with chequebooks + savings + time deposits < 100 K
M3 ~ Notes and Coins available + Non-banks travellers check + fixed deposits + deposits with chequebooks + savings + time deposits < 100 K + other liquid assets
MZM ~ Notes and Coins available + Non-banks travellers check + money market funds