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34 Cards in this Set
- Front
- Back
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What is chapter 9 about?
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Economic Relationships
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How are Economic relationships used?
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used to develop tools to explain growth, the business cycle, and inflation.
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What does APC stand for?
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Average Propensity to Consume
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What does APS stand for?
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Average Propensity to Save
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At any level of disposable income, APC+ APS equals what?
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1
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what does MPS stand for?
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Marginal Propensity to Consume
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MPS?
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Marginal Propensity to Save
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MPS + MPC = ?
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1
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What does LRAS/D stand for?
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Long Run Aggregate Supply/Demand
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What does SRAS/D
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Short Run Aggregate Supply/ Deman
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What does Aggregate Demand consist of?
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C +Ig + G + Xn
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what does C +Ig + G + Xn mean?
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Consumption + government investment + Government Spending + Net Exports
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how does one work at more than full employment.
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workers are working overtime; machines working 24/7
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why when working above full employment, does it go down to equilibrium.
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workers are burned out, and dont do overtime, and wages rise.
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a leftward shift of SRAS is also know as what
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Inflation
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what causes Cost-Push inflation
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an increase of resource prices
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working below full employment is considered
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a negative gap or a recessionary gap.
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in a recession, what kind of policy should the government take.
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Expansionary Fiscal Policy
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is government spending a good thing?
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yes, if the government has sufficient tax income funds.
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what does expanionary fiscal policy entail?
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either raising government spending, or lower taxes.
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what is discretionary?
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the governments ACTIVE participation in economics
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what is non-discretionary?
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the governments PASSIVE participation in economics.
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What is the purpose of expansionary fiscal policy
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to increase Aggregate Demand
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Increased government spending shifts aggregate demand to the...?
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right
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demand pull inflation is what?
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a rightward shift of the AD, resulting in working past full employment.
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what does demand pull inflation ALWAYS do?
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it causes the price level to go up.
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taxes cut by 8 billion
government spending is 8 billion MPC is .75 which has a more expansionary effect |
AD initially shifts to 8 billion. adding the multiplier (8 x (1/1-.75)=4), the government spending has the greater, positive effect.
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how do you find out the amount of a needed tax cut?
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MPC(needed tax cut which is x) = proposed tax cut
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what is contractionary policy
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when the government lowers Aggregate Demand.
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how do Net Taxes change with GDP
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Tax revenues automatically rise with GdP
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what is the Progressive tax System
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Average tax rate increases as income increases
Federal Income Taxes |
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Proportional Tax System
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Average tax rate remains constant
State income Tax |
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Regressive Tax System
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Average tax rate decreases as income increases
Sales tax |
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the more progressive a tax system....
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the greater the stability.
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