Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
9 Cards in this Set
- Front
- Back
|
What is LRAS and why is it vertical?
|
Long Run Aggregate Supply, which is the total potential product that an economy can supply given its resources. it is vertical because it does not depend on prices (classical dichotomy: real= output; nominal= prices)
|
|
|
the classical macroeconomic model best describes short or long run economics? why?
|
long run, because in the long run, prices do not effect output, but they do in the short run yo.
|
|
|
what is the sticky wage theory?
|
nominal wages adjust sluggishly in the short run, but increase, along with output, with increases in price
|
|
|
what is sticky price theory?
|
since their are costs associated with increasing prices, businesses sometimes temporarily keep their prices low, which increases demand and output
|
|
|
what is the money multiplier and formula
|
the total amount of money that banks can commercially create through loans
m= 1/r(eserve requirement) aka money multiplier is inversely related to the reserve requirement aka the lower the reserve requirement, the more money can be produced |
|
|
monetary supply is made up of...
|
currency and demand deposits
|
|
|
monetary base is made up of...
|
currency and reserves
|
|
|
difference between discretionary and non-discretionary spending
|
discretionary is spending appropriated by congress, while non-discretionary is spending required by law (that is, laws must be changed to change the spending)
|
|
|
non discretionary spending is sometimes called... why?
|
automatic stabilizers, it passively responds to a changing economy
|
