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26 Cards in this Set
- Front
- Back
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aggregate demand& supply model
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def. aggregate demand AD
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the amount of real output that buyers collectivley desire to purchase.
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AD= cignx
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aggregate demand is influenced by consumption, investment, government and net exports.
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Reason for demand curve shape
PIE |
purchasing power, intrest rate, exports
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NON price demand shifts
cignx |
consumption,investment,government,net exports
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spending multiplier
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4
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change in spending=change in gdp
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initial change in spending times the spending multiplier = RGDP
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Def aggregate supply (AS)
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shows the level of domestic output that firms will produce.
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long run and short run and immediate short run AS
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immediate=everything fixed
short run=wages fixed / prices vary long run=everything variable |
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why wages and prices are inflexable
WMMMW |
wage contracts,minimum wage,menu costs,moral price wars
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Nonprice supply shift
RRSTT |
resource prices, regulation,subsidies,taxes, technology
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AD - AS model equilibrium
(price level & real output) |
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shifts in the AD & AS curves
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demand pull and cost push
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Demand pull & cost push inflation
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as demand increases inflation increases.
As costs go up it pushes the supply line to the left and increaes prices |
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def. fiscal policy
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change in government spending spending and/or taxes by CONGRESS. to achieve FE, economic growth and price stability.
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discretionary vs. non discretionary
fiscal policy |
discrectionary=make choices in spending.
non discretionary=automatic policy like unemployement benefits. |
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expansionary vs. contractionary
fiscal policy |
expansion=increase spending
contraction=reduce spending |
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built in auto stabalizers
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like unemployement benefits
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budget deficit vs.Public debt
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deficit=annual
public debt=accumulated total debt |
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false concerns regaurding public debt (BBB)
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Bankruptcy,burden on future,no borrowing for other businesses
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lags (RAO) in fiscal policy
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recognizing in recession,agreeing,operation.
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economic growth & AS curve
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Phillips curve (inflation/unemployment relationship)
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temporary profit boost but in long run will lose out.
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stagflation
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higher prices, lower quantity
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supply side economics
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reduce tax &work harder
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Laffer curve
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higher taxes will result in higher revenues up to a point
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