How do Budget Constraints Create Demand Curves? The budget constraint is a trade off based upon a finite budget or available resources. When the price of a good changes, the budget constraint changes.  Individuals seeking maximum utility from their purchases will purchase the quantity of goods where the utility received from the next unit of each go...

What is Contractionary Fiscal Policy? Fiscal policy can also contribute to pushing aggregate demand beyond potential GDP in a way that leads to inflation. The graph below shows, a very large budget deficit pushes up aggregate demand, so that the intersection of aggregate demand (AD0) and aggregate supply (SRAS0) occurs at equilibrium E0, which is an...

What is a Qualified Domestic Relations Order (QDRO)? A Qualified Domestic Relations Order is a court order directed at holder of an individuals retirement funds. In most states, spouses acquire a legal or equitable interest in all assets that come into the estate (except for assets received as a gift or inheritance) during the marriage. This include...

What are Abatement Costs? Abatement costs are those associated with reducing the amount of toxic or unwanted by-products from a manufacturing process. How are Abatement Costs Used? The United States Environmental Protection Agency has the right to impose penalties on businesses that havent adequately addressed high outputs of toxic by-products in th...

What is a Bilateral Trade? Bilateral trade is a trade agreement between two countries. Generally it involves a plan for balanced trade between the two countries. That is, there will be no major deficit or surplus in trade between the countries. Also, in bilateral trade, the two countries agree to reduce tariffs, remove import quotas, export restrain...

What is Cultural Intelligence? Cultural Intelligence (CQ), as proposed by Christopher Earley and Elaine Mosakowski, addresses the ability to understand national, corporate, and vocational culture.  The theory identifies three sources of Cultural Intelligence. Head (Cognitive) - Directed study on attributes of foreign culture. Body (Physical) - Demon...

What is the Foreign Account Tax Compliance Act (FATCA)? In the United States, the Foreign Account Tax Compliance Act (FATCA) is a law that requires all citizens of the US who are either at home or in foreign countries to file a report on their account holdings. FATCA compels foreign business owners and companies to file assets being held by U.S citi...

What is the Neoclassical Phillips Curve Tradeoff? The short run upward sloping aggregate supply curve implies a downward sloping Phillips curve; thus, there is a tradeoff between inflation and unemployment in the short run. By contrast, a neoclassical long-run aggregate supply curve will imply a vertical shape for the Phillips curve, indicating no l...

What are Dealers in the Interbank Market?  Most people and firms who are exchanging a substantial quantity of currency go to a bank, and most banks provide foreign exchange as a service to customers. These banks (and a few other firms), known as dealers, then trade the foreign exchange. This is called the interbank market. In the world economy, roug...

What is transferor warranty of a negotiable instrument? A transferor of a negotiable instrument warrants the following to the recipient of the instrument: Good Title - The transferor has good title to the instrument; Enforceability - The transferor is entitled to enforce the instrument; Authorization - All signatures are authorized and authentic; Al...