Principles of Macroeconomics/Monetary Policy and International Trade

SECTION 7 Introduction to monetary policy
Fiscal policy and monetary policy are the two main tools by which government attempts to steer the macroeconomy toward the three main goals and economic growth.

Monetary policy consists of methods through which the Federal Reserve attempts to engage banks, businesses, and individuals in effecting changes to interest rates, the supply of money, the demand for money, and so forth.

Money serves as a medium of exchange, a store of value, and a unit of account. Those three functions enable individuals to avoid bartering. The ways in which we define and measure money are important to managing an economy. Savings and investment are key elements within the circular flow model and are a function of interest rates.

7.1 Introduction to macroeconomic policy

7.2 Monetary policy

7.3 Banks and the banking and Federal Reserve systems

7.4 Monetary tools

7.5 The money market

SECTION 8 Issues with monetary policy
8.1 Issues with monetary policy

8.2 Other macroeconomic issues

8.3 Interactive lab

SECTION 9 International trade
Trade among countries serves many functions aside from the exchange of goods and services at a global level. For instance, trade facilitates movements of foreign currencies held in a country's bank because imports are paid in the unit of the exporting country's currency. Additionally, trading partners have more and a greater variety of goods available to them. In short, those gains from trade arise out of comparative advantage, specialization, and export activities.

However, international trade can become and often is an emotionally or politically charged issue that cuts across microeconomics and macroeconomics; it is probably a good time now to recall the difference between them. Nonetheless, most of the content within this unit centers on the topic from an economic perspective and directs attention to factors such as trade balances, exchange rates, and other aspects of a country's macroeconomic performance.

Introduction to trade

Absolute advantage and comparative advantage

Tariffs and quotas