Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key

image

Play button

image

Play button

image

Progress

1/14

Click to flip

14 Cards in this Set

  • Front
  • Back
For US economy, the most important reason for the downward slope of the AD curve is the interest rate effect
nb
nb
theory of liquidity preference
keyens's theory that the interest rate adjusts to bring money supply and money demand into balance
analysis of interest rate summed up in 3 steps
1)increase P makes increase money demand
2)increase money demand makes increase interest rate
3)increase interest rate implys decrease Qd of G&S
whenever Qd of G&S changes for a given price level the AD curve shifts
nb
nb
federal funds rate
the interest rate that banks chare one another for short term loans
monetary policy can be describes either in terms of the money supply or in terms of the interest rate
nb
nb
mulitplier effect
teh additional shifts in AD that result when expansionary fiscal policy increases income and thereby increases consumer spending
investment accelerator marginal propensity to consuem (MPC)
the fraction of extra income that a household consumes rather than saves
govt multiplyer=
1/(1-MPC)
the larger the MPC is, the greater is this induced effect on consumption and the larger is the multiplier
nb
nb
crowding out effect
the off set in AD that results when expansionary fiscal policy raises the interest rate and thereby reduces investment sending
automatic stabilizers
changes in fiscal policy that stumulate AD when the economy goes into a recession without policymakers having to take any deliberate action
expansionary policy
increases money supply
contractionary policy
decreases money supply