Study your flashcards anywhere!
Download the official Cram app for free >
- Shuffle
Toggle OnToggle Off
- Alphabetize
Toggle OnToggle Off
- Front First
Toggle OnToggle Off
- Both Sides
Toggle OnToggle Off
- Read
Toggle OnToggle Off
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
35 Cards in this Set
- Front
- Back
Aggregate Demand is the function of what 3 variables?
|
1. interest rates
2. real income Y 3. price level P |
|
Why is the Aggregate demand curve downward sloping?
|
because there is a negative relationship between P and real income Y due to the interaction between the money and goods markets, assuming G,T,Ms remains constant
|
|
What is true along the AD curve?
|
1. all points are equilibrium points in both $ and goods markets
2. we assume there is no change in fiscal or monetary policy to change P, and Ms, T, G are all constant |
|
What shifts the AD curve?
Which way? |
1. change in fiscal policy
2. change in monetary policy expansionary shifts R contractionary shifts L a change in C or I unrelated to policy also shifts AD |
|
Who tracks the capacity utilization rate?
What is the average over last 25 yrs? |
the Fed
81% |
|
Why is full capacity utilization not healthy for the economy?
|
1. work cannot be sustained
2. wages will increase and put presusre on prices leading to inflation |
|
What shifts aggregate supply?
|
1. cost shocks
2. economic growth/deterioration 3. supply side economic policies 4. natural disasters/good weather |
|
what shifts aggregate supply to the right?
|
1. lower costs (input prices, wages)
2. economic growth (more capital, labor, tech) 3. Public policy (tax cuts, deregulation) 4. good weather |
|
what shifts aggregate supply to the left?
|
1.higher costs
2.stagnation(capial deterioration) 3.public policy(waste, inefficitency, overregulation) 4.bad weather, natural disasters, destruction from wars |
|
when is the Long run aggregate supply curve vertical?
|
if wage reates and other costs fully adjust to changes in P
(potential GDP- sustainable GDP in the long-run) |
|
how long are policy lags for monetary policies vs. fiscal policies
|
inside(monetary=short, fiscal=long)
outside(monetary=long) |
|
what is inflation initiated by aggregate demand?
|
Demand-Pull inflation (an increase in Ms or Consumer confidence)
|
|
what is inflation initiated by aggregate supply?
|
Cost-push or supply-side inflation (increase in costs or stagflation which is decreased output with increase in P) pg 276
|
|
What must increase to sustain long run growth?
|
1.number of hours worked and/or more workers
2.amount of capital or quality of capital 3.productivity |
|
what is compartive advantage?
|
Neoclassical economic theory=all parties benefit from free trade and specialization
|
|
what are the three trade barriers?
|
1.tariffs
2.export subsidies 3.quotas |
|
what is the goal of tariffs?
|
to make imports domestically more expensive, reduce demand for imported goods
|
|
who pust out tariffs rates on all products?
|
International Trade Commission ITC
|
|
What is dumping?
|
when a firm/industry sells product on world market at or below cost in order to drive out competition and then raise prices
|
|
who considers dumping illegal?
|
GATT general agreement on tariffs and trade
US + 22 countries |
|
what are three reasons a country would impose protectionist measures
|
1.save domestic jobs
2.other country's usage of unfair trade practices like dumping 3.protection to allow infant industries to survive |
|
who are the demanders of a currency
|
1.tourists
2.importers 3.purchasers of stocks and bonds 4.investors 5.traders who anticipate a depreciation |
|
factors that affect exchange rates/ shift S and D curves
|
1.change in price level
2.change in interest rates |
|
how are inflation and currency value related?
|
inversely
inflation=depreciation deflation=appreciation |
|
how are interest rates and currency value related?
|
directly
higher r=appreciation lower r=depreciation |
|
who measures and reports GDP?
how often? |
quarterly by BEA
|
|
when does crowding out occur?
|
expansionary fiscal policy
|
|
who measures UE and how often reported?
|
BLS monthly
|
|
what does the natural rate of unemployment correspond to?
|
potential GDP-level of output at LRAS
|
|
What two things measure inflation?
|
GDP deflator and CPI
|
|
GDP deflator
|
nominal GDP/real GDP X 100
|
|
Who measures and reports inflation rate changes?
|
BLS monthly
|
|
the largest public holder of us debt is
|
the social security trust fund
|
|
link from money to goods market
|
r
|
|
is the discount rate greater or less than fed funds rate
|
greater
|