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28 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Business cycle |
Altering periods of econ growth and contractions |
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Classical Econ |
Stable. The economy can fix itself. Because of flexiable wages/ prices |
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Keynesians econ |
Econ unstable government needs to get involved. Believes its because people aren't stopping as muh(all about demand) |
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Priming the pump |
Economy sucks shifts right |
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Overheating |
Shifts left |
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Recession |
A decline in real GDP FOR AT LEAST 2 or 3 quarters (3 every 3 months) |
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Growth recession |
Period where real GDP guess but b not at our 3% growth |
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Deman side policy |
Physical policy- purpose to shift demand curve right Monetary policy- macro econ policy for country's to achieve inflation, consumption, growth and liquidity. management of money supply and interest rate |
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How to measure business cycle |
Real GDP |
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Internal market forces are |
population growth, spending behavior, intervention, and innovation. |
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External shocks are |
wars, natural disasters, terrorist attacks, trade disruptions. |
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Policy lever ( classical not believe) |
tax policy, government spending, changes in the availability of money, regulation. |
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Classical focuses on.. |
Long term |
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Keynesians focuses on |
Short term gov involved |
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What does this mean |
Supply right = + Demand right= + Supply left= - Demand left= - |
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Components of aggregate demand |
C+I+G (x-m) |
70% |
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Marginal propensity to consume def And formula |
Adds extra dollar to disposable income spent on income MPC= Change consumption/ change income= |
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Consumption function |
Shows relationship between consumption and national gross income |
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Consumption function formula |
C= a+bYd a = autonomous consumption consumption when income is zero. (e.g. even with no income, you may borrow to be able to buy food)) B= marginal propensity to consume (the % of extra income that is spent). Also known as induced consumption Yd= disposable income (income after government intervention – e.g. benefits, and taxes) |
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autonomous spending |
Spending automatic and necessary, whether occurring at the government level or the individual level. |
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Non income determance |
Things determine spending not including income ( expectations, wealth, taxes, availability of credit) |
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Non income determances changes.. |
Consumption function + up demand right - down demand left |
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Purpose of incone transfer |
Too help stabilize demand Ex. Wealfare |
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What do economist fight about discussing business cycles? |
What to do about them |
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Leakeges |
Savings, Taxation and Imports |
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Injections |
Investment, Government Expenditure and Exports |
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Multiplier |
1/(1-MPC) Change in spending after total expenditures after infinite # of spending cycles |
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Multiplier |
1/(1-MPC) Change in spending after total expenditures ( spending) after infinite # of spending cycles |
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