Abraham's AP MacroEconomics Blog

Measure of money in flows and out flows between the US and the rest of the world In flows referred to as credits Out flows referred to as debit The balance of payments is divided into 3 accounts 1. Current account Balance of trade or net exports Exports is known as a credit or asset. Debit is known as a debit or liability. Net foreign income or net investment Income earned by US owned foreign assets Encompasses income paid to foreign held US assets Net transfers Foreign aid ex. US giving money to another country for weather related disaster or famine ex. A worker sending money back home to family Tend to be unilateral 2. Capital/financial account Balance of capital ownership includes the purchase of real and financial assets Real assets are real estate. Financial assets are stocks and bonds.  Direct investment in the US is a credit to the capital account ex. Toyota factory in San Antonio Direct investment by US firms/individuals in a foreign country

Disinflation this also occurs when aggregate demand declines a reduction in inflation rate from yr to yr seen in LRPC Deflation general decline in the price level Hyperinflation when economy experiences a high and unusual rate of inflation which can decrease value of local currency Supply-side economics changes in AS not AD  to determine the level of inflation, unemployment rates, economic growth aka Reaganomics trickle-down effect economists support policies that promote GDP growth by arguing that high marginal tax rates along with the current system of transfer payments (these transfer payments: unemployment compensation, welfare programs provide disincentives to work, invest, and undertake entrepreneurial ventures  Laffer-Curve depicts theoretical relationship between tax rates and government revenue as tax rates increase from zero, tax revenues increase from zero to some maximum level and then decline  3 criticisms of the laffer curve empirical eviden