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16 Cards in this Set

  • Front
  • Back
def of natural rate of output
amt of final goods and services produced in an economy when unemployment is at its natural rate
def of business cycle
fluctuations in the economy
--Periodic but irregular
Recession =
expansion =
A period of declining real incomes and rising unemployment

A period of rising real income and falling unemployment.
Stagflation
recession and inflation at the same time
Cause of cyclical unemployment
caused by business cycle
def of AD curve
total quantity of goods and services demanded in economy at each price level
2 causes to make AD curve negative
1, wealth effect
2, interest rate effect
Wealth effect =
decrease in price makes money worth more and makes people wealthier so they demand more
Interest rate effect =
decrease in price level reduces interest rate so people want to invest so they demand more
Factors that cause AD curve to shift:
changes in consumption
--HH expectations
--Gov Inc. Taxes
--change in money supply

changes in investment:
--firms expectations
--change in tech.
--taxes affecting businesses
--money supply
def of LRAS
period of time long enough to bring real GDP back to normal through natural economic forces
factors that cause LRAS to shift
L, K, H, N, A
def of SRAS
whenever real GDP has fallen below or risen above natural rate of output
why SRAS is positively sloped
the sticky-wage theory

nominal wages adjusts with a lag to changes in the actual price level
factors that shift SRAS
L, K, H, N, A, Price level
What causes fluctuations of real GDP around the natural rate of output?
shifts in AD and SRAS