Notes

Different types of Exchange Rate System
Full flexible or clean float system -- here exchange rate is allowed to adjust fully so as to eliminate bop surplus or deficit.
Fixed or pegged exchange rate system - Under this central bank supports a pre-assumed fixed exchange rate of buying and selling foreign exchange.
Managed or Dirty float-- here exchange rate is allowed to fluctuate but is not controlled entirely by the market forces of demand and supply, but the central bank limits the appreciation and depreciation of currency. It is the band within which exchange rate system fluctuates.

Frictional Unemployment - Workers have different preferences and jobs have different attributes. Flow of information about job candidates and job vacancies is imperfect and the geographic ability of workers is not instantaneous. The unemployment
caused by the time it takes for the workers to search for a job is called frictional unemployment.


Structural Unemployment - Unemployment resulting from wage rigidity and job rationing is called structural unemployment. Workers are unemployed not because they are looking for a job that best suit their skills but because at a going wage rate, supply of labor exceed its demand.

Consumer Price Index - It measures changes in price from base year to current year for a given fixed basket of goods and services purchased by a typical consumer.

Paradox of Thrift - Suppose people attempt to save more at a given disposable income, but it results in deduction in the economy's output level, As remains unchanged, this is known as Paradox of thrift.