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19 Cards in this Set
- Front
- Back
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long-run aggregate supply (LRAS) curve
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relates the level of output produced by firms to the price level in the long run
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equation of exchange=
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Money supply (M) x velocity (V) =Price (P) x value of real GDP (Y)
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Velocity
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number of times the money supply is spent to obtain the goods and services that make up GDP during a particular time period.
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nominal GDP=
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price level x real GDP
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quantity theory of money
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in the long run the price level moves in proportion with changes in the money supply, at least for high-inflation countries
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supply shift to right -> bond prices down -> interest rate up -> private investment down
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supply shift to right -> bond prices down -> interest rate up -> private investment down
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Increase interest rate-> increase exchange rate -> lower net export
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Increase interest rate-> increase exchange rate -> lower net export
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%ΔM+%ΔV≅%ΔP+%ΔY
%ΔP≅%ΔM−%ΔY %ΔP≅%ΔM−%ΔYp Yp=potential output |
%ΔM+%ΔV≅%ΔP+%ΔY
%ΔP≅%ΔM−%ΔY %ΔP≅%ΔM−%ΔYp Yp=potential output |
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money growth and inflation rate are ______ especially in high inflation countries
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proportional
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if money supply growth rate increases more rapidly than economic growth, _______ occurs
if money supply growth rate equal to economic growth, no _____ occurs if money supply growth rate falls below economic growth, _____ occurs |
-inflation
-inflation -deflation |
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long-run Phillips curve
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a vertical line at the natural rate of unemployment, showing that in the long run, there is no trade-off between inflation and unemployment
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frictional unemployment
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time period between jobs when a worker is searching for, or transitioning from one job to another
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reservation wage
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The lowest wage that an unemployed worker would accept, if it were offered
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Job Search graph
Wage \ /Best offer Received / / \Reservation Wage Duration of Search |
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Programs that provide labor-market information shifts Best offer Received curve to the ______
Unemployment Compensations shift reservation wage to the _____ |
-left
-right |
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Unemployment Compensation _______ unemployment duration and ______ wage.
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increases
increases |
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structural unemployment
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when a firm is looking for a worker and an unemployed worker is looking for a job, but the particular characteristics the firm seeks do not match up with the characteristics the worker offers
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cyclical unemployment
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when there is not enough demand for workers to employ everybody
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efficiency-wage theory
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The idea that firms may hold to a real wage greater than the equilibrium wage
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