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17 Cards in this Set

  • Front
  • Back
Economic fluctuation
1)Irregular and unpredicable

2)Macroeconomic quanitties fluctuare together


3) As output falls, unemployment rises

Aggregate demand curve
Other things equal, A fall in the economy's overall level of prices tends to raise the quantity of goods and services demanded
Why curve slopes downward
1)Wealth effect (C)

2)Interest rate effect (I)


3)Real exchange rate (NX)

Aggregate demand curve shift
1-Changes in consumption

2-Changes in investment


3)Changes in Gvt purchase


4)Changes in NX

Why the long-run aggregate supply curve shift
1)Changes in labour

2)changes in Capital


3)changes in natural ressources


4)Changes in technological knowledge


5) Short run add --> expectation of P level

Why does changes in P level affect output in the short-run
1)Sticky wage theory

2)Sticky price theory


3)The misperceptions theory

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Name 3 key facts about economic fluctuations?
1)irregular and unpredictable

2)Most macroeconomics quantitites flucate together


3)output falls, unempl. raises

Which componnent of aggregate demand varies the MOST over the buisness cycle?
Investment spending
What are three reasons the aggregate demand curve slopes downward?
Wealth effect

Interest rate effect


Real exchange rate effect

7. If the economy is in a recession, why might policymakers choose to adjust aggregate demand to eliminate the recession rather than let the economy adjust or slef corecte on its own?
They think they can get the economy back to the long run natural rate of output more quickly, or, in the case of a negative supply shock, they are more concerned with output and employment inflation
Does a shift in aggragate demand alter output in the long run?
No. In the long run, output is determined by factor supplies and technology. Changes in aggregate demand affect output only in the short run because relative prices are only temporarly altered
Why a decrease in the money supply unlikely to be neutral in the short run?
Lowers the price unexpectedly. Some prices and wages are sticky and adjust to the lower price level slower than others, causing a fall in output in the short run
How didi the model of short run economic fluctuations develop?
Of the grate depression 1930 - Keynes Recession can occur beauce of inadequate aggregate demand
What causes both long and short supply curves to shift together?
Changes in labour, capital, natural ressources, technlogy shift the short run and long run aggregate supply curve together.
What causes short run aggreagate supply to shift, but not the longrun one?
Changes in the expected price level only shift the short run cupply curve