Macroeconomics 26

Front 1

Quantity Supplied & Supply

Back 1

The quantity of real GDP supplied is the total quantity of goods and services, valued in constant base-year dollars, that firms plan to produce during a given period.

Front 2

Aggregate Supply

Back 2

The relationship between the quantity of real GDP supplied and he price level.

Front 3

Long Run Aggregate Supply

Back 3

Relationship et week quantity of real GDP supplied and the price level when the money wage rate changes in step with the price level to maintain full employment.

Front 4

Short Run Aggregate Supply

Back 4

Relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources as potential GDP remain constant.

Front 5

Long Run & Short Run Aggregate Supply

Back 5

Back (Definition)

Front 6

Changes in Aggregate Supply

Back 6

A change in the price level changes the quantity of real GDP supplied. AS changes when an influence on production plans other than the price level changes.

Front 7

Changes in Potential GDP

Back 7

When potential GDP changes, aggregate supply changes. An increase in potential GDP increases long run & short run AS.

-Increase in full employment quantity of labour

-An increase in quantity of capital

-An advance in technology

Front 8

Change in Potential GDP

Back 8

Back (Definition)

Front 9

Change in Money Wage Rate

Back 9

Back (Definition)

When money wage rate (or money price of any other factor of production) changes, short run AS changes but long run AS does not.

Front 10

Aggregate Demand

Back 10

Quantity of real GDP demanded (Y) is the sum of real consumption expenditure (C), investment (I), government expenditure (G), and exports (X) minus imports (M).

Y= C+I+G+X-M

Front 11

Buying Plans

Back 11

Depend on factors such as:

-The price level

-Expectations

-Fiscal policy and monetary policy

-The world economy

Front 12

Aggregate Demand

Back 12

Relationship between the quantity of real GDP demanded and the price level. Slopes downward because:

-Wealth effect

-Substitution effects

Front 13

Aggregate Demand

Back 13

Back (Definition)

Front 14

Wealth Effect

Back 14

When the price level rises, real wealth decreases. Real wealth is the amount f money in he bank, bonds, stocks and other assets people own, measure not in dollars but in terms of goods and services that the money, bonds, and stocks will buy.

Front 15

Substitution Effect

Back 15

When price level rises, interest rate rises. A rise in price level decreases the real value of money in people's pockets and bank accounts.

Front 16

Changes in Aggregate Demand

Back 16

A change in any factor that influences buying plans other than the price level brigs a change in AD. Main factors are:

-Expectations

-Fiscal policy and monetary policy

-The world economy

Front 17

Fiscal Policy

Back 17

Government's attempts to influence the economy by setting and changing taxes, making transfer payments, and purchasing goods and services.

Front 18

Disposable Income

Back 18

Aggregate income minus taxes plus transfer payments.

Front 19

Monetary Policy

Back 19

The Bank Of Canada's attempt to influence the economy by changing interest rates and the quantity of money.

Front 20

Changes in Aggregate Demand

Back 20

Front 21

Short Run Macroeconomic Equilibrium

Back 21

Occurs when the quantity of real GDP demanded equals the quantity of real GDP supplied.

Front 22

Long Run Macroeconomic Equilibrium

Back 22

Occurs when real GDP equals potential GDP-equivalently, when the economy is on its LAS curve.

Front 23

Economic Growth

Back 23

Results from a growing labour force and increasing labour productivity, which together make potential GDP grow.

Front 24

Economic Growth & Inflation

Back 24

Front 25

Above Full-Employment Equilibrium

Back 25

Equilibrium when real GDP exceeds potential GDP.

Front 26

Output Gap

Back 26

Gap between real GDP and potential GDP.

Front 27

Inflationary Gap

Back 27

When real GDP exceeds potential GDP, the output gap is called an inflationary gap.

Front 28

Full-Employment Equilibrium

Back 28

Real GDP equals potential GDP.

Front 29

Below Full-Employment Equilibrium

Back 29

An equilibrium in which potential GDP exceeds real GDP.

Front 30

Recessionary Gap

Back 30

When potential GDP exceeds real GDP, the output gap is called a recessionary gap.

Front 31

Above Full-Employment Equilibrium

Back 31

Front 32

Full Employment Equilibrium

Back 32

Front 33

Below Full-Employment Equilibrium

Back 33

Front 34

Fluctuations in real GDP

Back 34

Front 35

Increase in Aggregate Demand (Short Run)

Back 35

Front 36

Increase in Aggregate Demand (Long Run)

Back 36

Front 37

Decrease in Aggregate Supply

Back 37

Graph

Front 38

Stagflation

Back 38

A combination of recession and inflation.

Front 39

Classical View

Back 39

Believes the economy is self-regulating and always at full employment.

Front 40

New Classical View

Back 40

That business cycle fluctuations are the efficient repainted of a well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change.

Front 41

Keynesian View

Back 41

Believes that left alone, the economy would rarely operate at full employment and that to achieve and maintain full employment, active help from fiscal policy and monetary policy is required.

Front 42

New Keynesian View

Back 42

Holds that not only the money wage rate is sticky, but also that prices of goods and services are sticky.

Front 43

Monetarist View

Back 43

Believes that the economy is self-regulating and that it will normally operate at full employment, provided that monetary policy is not erratic and that the pace of money growth is kept steady.