This argues that some unemployment is frictional - for various information-related reasons, it takes time to find a new job.

It improves the quality of applicants and reduces worker turnover.

It reduces shirking at work and encourages harder work.

The trade balance is equal to net exports; the current account is net exports + net factor payments + net transfers.

Adaptive expectations (looking backwards) and rational expectations (looking forward)

Decrease in output demand, decrease in labour productivity, rise in input prices, fall in output prices.

Deflation reduces employment by causing downward wage rigidity, increasing costs for firms and thus reducing labour demand.

Deflation causes the real interest rate to increase, increasing saving and reducing investment.

Consumption falls --> Firm revenue falls, labour demand falls --> Unemployment rises, household income falls --> Consumption falls etc.

Inventory rebuilding, technological advances, change in expectations.

Expansionary

Growth in bank reserves reduces the Federal Funds rate, reducing interest rates, increasing consumption.

Factor payments are for assets; transfer payments are from individuals, corporations or foreign governments abroad.

e = (Units of foreign currency)/(1 unit of domestic currency)

e x (Domestic currency price of domestic goods)/(Foreign currency price of foreign goods)