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8 Cards in this Set
- Front
- Back
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What is Okun's Law?
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Okun's Law: The negative relationship between GDP and unemployment. Because employed workers produce goods and services, unemployed workers do not, so increase in unemployment can only be associated with a fall in GDP.
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What are Leading Indicators, What are they used for?
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Leading Indicators are variables that tend to change before the rest of the economy does.
ex. Average workweek of production workers in manufacturing, Average initial weekly claims for unemployment insurance, New Orders for consumer goods and materials adjusted for inflation. New Orders for nondefense capital goods. Index of supplier deliveries, New building permits issued, Index of stock prices, Money supply (M2) adjusted for Inflation, Interest rate spread: the yield spread between 10-year treasury notes and 3-month treasury bills. Index of consume expectations. |
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What is aggregate demand?
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Aggregate Demand is the realtionship between the quantity of output and demanded and the aggregate price level. the aggregate demand curve tells us the quantity of goods and services people want to buy at any given level of prices.
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What causes the Aggregate Demand Curve to shift? and in what directions?
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Changes in the money supply shift the aggregate demand curve. A decrease in M, shifts curve to the left.
An increase in M, shifts curve to the right. |
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What is Aggregate Supply?
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Is the relationship between quantity of goods and services supplied and the Price Level. firms that supply goods have flexible prices in the long run, but sticky prices in the short run, the aggregate supply depends on the time horizon. LRAS and SRAS
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Describe the shape if the LRAS and the SRAS curves, and what causes both of them to shift, and in direction is the shift?
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LRAS is a vertical line. Level of Y is determined by amounts of capital and Labor and the available technology, Not on price level.
SRAS |
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What are shocks?
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Exogenous events that shift these aggregate supply and demand curves are called shocks. Demand shock shifts aggregate demand curve, supply shock shifts aggregate supply.
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What is characteristic stabilization policy?
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policy actions aimed at reducing the severity of Short Run economic fluctuations.
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