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49 Cards in this Set
- Front
- Back
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Aggregate Supply
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The total supply of goods and services produced within a country's boarder during a specific time period.
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Real GDP
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Value of all goods and services produced within a country's boarders. Shows you the real and monetary value of the goods and services
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3 determinants that can change Aggregate Supply
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1) Changes in country's resources
2)Changes in cost/price of resources & inputs 3)Changes in technology |
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Changes in country's resources
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One of the 3 determinants that can change AS. More resources increases AS, vise versa
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Changes in Costs & Price of Resources and Inputs
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One of the 3 determinants that can change AS. If prices of resources decrease, AS increases
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Changes in technology
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One of the 3 determinants that can change AS. Technology improves AS improves
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Full Employment Real GDP/ Long Run GDP
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The max value of goods/services as a country can produce
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What is the nation's price level at full employment?
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Since LRAs is a vertical line, there is not enough info to answer
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Aggregate Demand
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The total demand for final goods & services by a nation during a specific time period
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4 Parts of Aggregate Demand
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1)Government Spending (G)
2)Investment Spending (IG) 3)Consumption Spending (C) 4)Net Exports (Xn) |
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Government Spending
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Total amount of $ spent by the government. More gov't spending, increases AD
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Investment Spending
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Total amount of $ spent by firms. More investment spending, increases AD
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Consumption Spending
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Total amount of $ spent by consumers & households. More spending, increases AD
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Net Exports
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Difference between a nations exports & imports. (NE=E-I)
More exports, increases AD More imports, DECREASES AD |
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Currency Appreciation
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Able to receive more Euros per $, decreases AD. Since Euro is cheaper, more Americans will import from Europe, but Europeans will purchase less US goods b/c its too expensive
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Currency Depreciation
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Less Euro per $. Increases AD. Since Euro is more expensive American will get less imports from Europe, but Europeans will purchase more US gods b/c it is cheaper!
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Inflation
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When price level increases, a country experiences inflation, the avg price of goods/services are increasing
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Expansion
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When Real GDP increases a country experiences expansion
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Contraction
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when Real GDP decreases, a country is experiences contraction
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Economic Growth
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A country experiences Economic Growth when Aggregate Suppply increases. The country will experience expansion and deflation during economic growth
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Recession
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when a country experiences a contraction for more than 2 quarters (6months) AD decreases, deflation &contraction
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Stag Flation
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A country experiences a contraction, Aggregate Supply decreases, inflation &contraction
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Business Cycles
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country experiences a peak, contraction, trough, & expansion
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Peak
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High point of Business Cycle, Real GDP will not increase anymore
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Trough
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Lowest point of Business Cycle, Real GDP will not decrease anymore. US has experienced 33 Business Cycles
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Peaks in the US economy
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Aug 1929, May 1937, Feb 1945
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Troughs in the US economy
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March 1933, June 1938, Oct 1945
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Bank Runs
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People taking all their money out of banks due to banks going bankrupt. Caused banks to close down, people lost their saving, AD decreased b/c people lost their wealth
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Nominal GDP
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the face value of a country's good and service, not adjusted for inflation
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Real GDP Formula
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Real GDP= Nominal GDP x (price index of the base year/ price index of current year)
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4 Types of Unemployment
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1)Classical Unemployment
2)Cyclical Unemployment 3)Frictional Unemployment 4)Structural Unemployment |
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Classical Unemployment
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More job seekers than jobs available
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Cyclical Unemployment
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people who are unemployed due to changed in Aggregate Demand
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Frictional Unemployment
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People who are unemployed because they are switching between jobs
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Structural Unemployment
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People who are unemployed due to technology or changes in industry
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Unemployment Rates
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Shows the number of people in a labor force that are looking for jobs.
(UR= # of unemployed/labor force |
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Gross Investment
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total amount of money a country invests, cannot be negative
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Net Investment
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can be poss or neg investment if depreciation is greater than the gross investment
(Net investment= gross investment- amount of depreciation) |
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Disposable Income
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Money you earned after paying taxes
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Consumption
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How much money you spend
C= Dis Inc- Savings |
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Savings
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the money ou save from your income
savings= Dis inc- consumption |
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Marginal Propensity to Save (MPS)
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shows what percentage of a household's extra income will be saved
MPS= (change in savings)/ (change in income) |
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Marginal Propensity to Consume (MPC)
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shows how much household's extra income will be used
MPC=(change in consumption)/ (change in income) |
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Savings Function
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Shows how much income a household will save, need to know the house's savings when disposable income is 0 and the MPS
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Consumption Function
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Shows how much income a household will use. Need to know the house's consumption when disposable income is 0 and the MPC
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Average Propensity to Save
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the percent of income that a household saves
APS= S/DI |
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Average Propensity to Consume
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the percent of income that a household consumes
APC= C/DI |
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Wealth Effect
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states that when price levels decrease, everything will be cheaper. Therefore consumers feel wealthier
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Interest Rate Effect
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when price levels fall, interest rates will fall too so businesses invest more
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