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16 Cards in this Set
- Front
- Back
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def of natural rate of output
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amt of final goods and services produced in an economy when unemployment is at its natural rate
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def of business cycle
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fluctuations in the economy
--Periodic but irregular |
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Recession =
expansion = |
A period of declining real incomes and rising unemployment
A period of rising real income and falling unemployment. |
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Stagflation
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recession and inflation at the same time
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Cause of cyclical unemployment
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caused by business cycle
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def of AD curve
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total quantity of goods and services demanded in economy at each price level
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2 causes to make AD curve negative
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1, wealth effect
2, interest rate effect |
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Wealth effect =
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decrease in price makes money worth more and makes people wealthier so they demand more
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Interest rate effect =
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decrease in price level reduces interest rate so people want to invest so they demand more
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Factors that cause AD curve to shift:
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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 |
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def of LRAS
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period of time long enough to bring real GDP back to normal through natural economic forces
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factors that cause LRAS to shift
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L, K, H, N, A
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def of SRAS
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whenever real GDP has fallen below or risen above natural rate of output
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why SRAS is positively sloped
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the sticky-wage theory
nominal wages adjusts with a lag to changes in the actual price level |
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factors that shift SRAS
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L, K, H, N, A, Price level
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What causes fluctuations of real GDP around the natural rate of output?
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shifts in AD and SRAS
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