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19 Cards in this Set
- Front
- Back
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A function that shows the combinations of the general price and GDP levels that clear the goods and money markets.
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Aggregate Demand Function
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Explanation for the negative slope of the AD function that operates through the money market.
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Interest Rate Effect
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An expansionary fiscal policy will shift the AD function to the ...
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right
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A phrase referring to fiscal or monetary policy.
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Demand Management Policy
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Along the AD function the goods and money markets are in ...
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Equilibrium
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Explanation for the negative slope of the AD function that operates through the relative prices of foreign and domestic goods.
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Foreign Trade Effect
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Explanation for the negative slope of the AD function that operates through the increase in household real wealth.
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Wealth Effect
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Active changes in G, TR, or TX to affect the state of the economy.
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Fiscal Policy
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A contractionary monetary policy will shift the AD function to the ...
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left
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What does the intersection point of AD and AS functions indicate?
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General Equilibrium
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The model that posits that workers in a company are more important to managers in wage negotiation than those laid off.
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Insider-Outsider Model
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The name for the costs incurred by for such things as publishing new catalogs in the case of a price change.
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Menu Costs
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The phrase that describes the fact that wages and prices do not move fast enough to clear the labor market.
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Wage-Price Rigidity
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Labor and price contract are two reasons for:
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Wage-Price Rigidity
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Producers do not increase their prices out of fear that others may not follow suit, they do not want to reduce their prices out of concern that others will follow suit. This is called:
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Coordination Problem
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Wages paid to workers that are higher than equilibrium wages to buy their loyalty and increase workers’ morale.
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Efficiency Wages
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Any event that results in higher prices under the existing demand conditions.
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Supply Shock
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Which demand management policy Keynes thought was not effective in a recession?
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Monetary Policy
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Describes the economy’s ability to eventually return to a state of equilibrium without any government intervention.
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Self-Correcting Mechanism
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