Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
10 Cards in this Set
- Front
- Back
|
the wealth effect
|
lower price level. increased household dollar value. stimulates consumption
|
|
|
the interest rate effect
|
lower price level. less demand for currency, increased lending, decreased interest rates, increase investment spending
|
|
|
the exchange rate effect
|
lower price level reduces interest rate. investment moves overseas. domestic currency weakens. increased demand for domestic goods. stimulates nx and demand.
|
|
|
what causes the downward agg. demand slope?
|
wealth, interest rate, and exchange rate effects.
|
|
|
liquidity preference
|
interest rate adjusts to bring money supply and demand in balance
|
|
|
fiscal policy
|
setting the level of gov. spending and taxation
|
|
|
multiplier effect
|
additional shifts in agg demand after expansionary fiscal policy, leads to more consumer spending
|
|
|
MPC
|
marginal propensity to consume
|
|
|
crowding out effect
|
offset in agg. demand that results when exp. fiscal policy raises interest rate/reduces investment spending.
|
|
|
automatic stabilizers
|
stimulants to agg. demand when economy recesses without and deliberate action. IE: unemployment benefits
|
