Factor intensity refers to intensity of the factors of production used in the production of a certain commodity.

The sum of cash in bank’s vault and demand deposits in central bank and other banks are called as reserves.

The rule of 70 allows us to easily calculate how much it takes for a variable to double itself. If a variable grows at a pace of x per cent per year, then it will take approximately years for that variable to double in value.

With rising input prices, general price level increases (inflation) while production decreases and unemployment increases (stagnation). This process in which prices and unemployment increase at the same time is known as stagflation (inflation in stagnation).

Bank’s basic business principles and especially the reserves they hold as we try to outline above demonstrate another important function of banks they undertake in the economy: Money creation. In fact banks create money by collecting deposits from people and using them to make loans and investments. This money created in form of demand deposits as a result of banks’ credit transactions is called as deposit money.

Expenditure-switching policies are the policies which switch the total expenditure from imported commodities to domestic commodities or vice versa.

Open market operations are the purchasing/selling of government securities (government bonds and treasury bills) in the money market. The goal of purchasing/selling operations performed by the central bank in the market is to expand/restrict the reserves of the banking system.

Tariff is a tax or a duty levied on the traded commodity as it crosses a national boundary.

Since there is no government and international trade in the economy, income determination process can be written as:

Y = C + S

The Heckscher-Ohlin theory explains the reason of the differences in the relative commodity prices in autarky by using the factor intensity and factor abundance.

Inflation is the continuous increases in general price level for a long time.

International trade which has deeply penetrated to our ordinary life has a comprehensive theory dating back to the seventeenth century. Starting with the economic philosophy called mercantilism, the international trade theory seeks to respond the basis for and the pattern of international trade between the trading countries and the economic gains of the trading countries from international trade.

Imperfect competition is a type of market structure showing some but not all the features of perfect competition.

Currency revaluation is the rise in the value of one currency in terms of another currency by the decision of the central bank.

Factors of production are the inputs used in the production process. They are the physical capital (K), labor (L), natural resources (raw materials, land, energy, etc.) and the entrepreneurship.

The interest rate influences the planned aggregate expenditures, thus causing the production level to be determined.

Real exchange rate is the nominal exchange rate weighted by the consumer price index of the two countries.

The objects having no value as goods but referring to a value in purchasing goods and services are called as fiat Money.

Sir Thomas Gresham was sixteenth century financial agent in Britain Kingdom.