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

1/8

Click to flip

8 Cards in this Set

  • Front
  • Back
Why is the AD curve negatively sloped?
at higher P, demand for nominal money is high, people try to sell bonds, price of bonds fall, interest rates rise, spending and output fall.
Slope of AD depends on
d2 (interest sensitivity on money demand), b2, (interest sensitivity on investment), c1 (MPC), b1 (MPI)
What causes shifts of AD to the right
increase in G, increase in Co, increase in Bo, increase in M, increase in T. P will cause movements, not shifts
when unemployment is greeater than natural? When unemployment is less than natural?
greater: there are deflationary pressures.
less: inflationary
As unemployment rises, what happens to the price level?
price level falls
Why is the AS curve upward sloping?
higher output requires more labor, unemployment falls, nominal wages increases, price levels increase.
In the medium run, what is the effect of output on P
nothing.
If price levels are higher than expected
wage setters will increase expectations, AS curve shifts upward, the higher price level causes nominal wages increase, higher price level.