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16 Cards in this Set
- Front
- Back
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Business cycle
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Alternating periods of economic growth and contraction
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Laissez fire
Classical theory |
"Leave it alone" - no gov't intervention in the market
Let the economy fix its self (recession eventually Wages down = Employers hire Prices go down = ppl buy |
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Say's Law
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Supply creates its own demand
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Recession
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Real GDP contracts - two or more consecutive quarters
GDP 0 or Less |
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Growth recession
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Real GDP grows but slower than 3%
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Equilibrium (Macro)
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combination of price level and real output that is compatible w/ both aggregate demand and aggregate supply
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Full-Employment GDP
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Total market value of goods and services that could be produced at a given time at full employment, Potential GDP
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Fiscal Policy
Keynesian theory |
use of government taxes and spending to alter macroeconomic outcomes
A) Increase spending B) lower taxes |
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monetary policy
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use of money and credit controls to influence macroeconomic outcomes
Federal reserve A) Increase money supply B) Lower interest rates |
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supply-side policy
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use of ta incentives, (de)regulation, and other mechanisms to increase the ability and willingness to produce goods and services
A) Lower Corp taxes B) (de)regulate business |
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Long run economics
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aggregate demand shifts will affect prices but not output
aggregate supply curve is vertical |
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AS Shifts left if
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business cost increase
business taxes rise natural disaster |
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AS shifts right if
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Business costs fall
business taxes fall bounteous harvests occur |
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AD shifts left if
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spending decreases
expectations get worse taxes increase |
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AD shifts right if
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spending increases
expectations improve taxes decrease |
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Keynesian theory
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a) recession originates with a deficiency of spending
policy increase gov'g spending b) inflation originates with excess spending policy increase taxes |
