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44 Cards in this Set

  • Front
  • Back
according to the law of demand
people buy more of a good when the price falls
what is consistent with the law of demand
college enrollment increases when federal tuition grants are readily available
a demand schedule
is only for a given time period
define law of demand
when the price of a product falls, the quantity demanded of the product will increase and vice versa
define demand schedule

a table that shows the relationship between the price of a product and the quantity of the product demanded
a rightward shift of a demand curve shows

an increase in demand

a shift to the left of a demand curve shows

a decrease in demand

mary decreases her consumption of good x after the price of good y decreases, for mary

good x and good y are substitutes

define the law of supply

increases in price causes increases in the quantity supplied and decreases in price cause decreases in the quantity supplied

other things being equal an increase in the price of a good leads o an increase in the amount produced. this is known as

law of supply
the data points on a supply curve come from

the supply schedule

what is likely result of the dramatic decrease in the price of microprocessor chips to computer manufacturers in the last two decades

an increase in the supply of computers

a surplus exists when

quantity supplied is greater than quantity demanded
the labor force participation rate is the

proportion of the adult population in the labor force

frictional unemployment will always exist because

some workers quit their jobs without having another job already lined up

structural employment is

a result of a poor match of workers abilities and skills with current requirements of employers

cyclical unemployment is

a result of business recessions that occur when aggregate demand is insufficient to create full employment

full employment includes

employed people plus the natural rate of unemployment

deflation is the situation when

the average of all prices is declining

when computing a price index, the base year is

the year that is chosen as the point of reference for comparison of prices with other years

the GDP deflator is

the most general indicator of inflation since it measures changes in the prices of all goods in the economy

the real rate of interest is
the interest rate observed in the market minus the inflation premium

the real price of a good is

the nominal price adjusted by the level of inflation
good and services are sold

in the product markets

total income is

the yearly amount earned by the nations resources
GDP does not include intermediate goods because

that would count the value of intermediate goods twice
value added is

the amount of dollar value contributed to a product at each stage of its production

the expenditure approach to measuring GDP

adds the dollar value of final goods and services

an increase in investment spending that increases GDP occurs when

a business buys a new computer

using the expenditure approach GDP is calculated as

consumption expenditures + investment expenditures + government expenditures + net exports

the income that individuals have after personal income taxes have been paid is called

disposable personal income
constant dollars are

dollars corrected for general price level changes

real GDP id

GDP corrected for changes in the average of overall prices

given the assumptions of the classical mode

the market is a self-correcting mechanism

in the classical model, and increase in the aggregate demand will lead to an increase in wage rates while a decrease in aggregate demand will

decrease wages
according to the Keynes, wages were inflexible because

of unions and long term contracts

a basic difference between the classical mode and the Keynesian model is that

the classical model assumes that the level of real GDP is supply determines while the Keynesian model assumes that it is demand determined

a change in tastes for US produced goods will

lead to an aggregate demand supply curve

if aggregate demand falls, then

there will be a contractionary gap
demand-pull inflation is

inflation caused by increases in aggregate demand that is not matched by increases in aggregate supply

what can cause inflation

decreases in short-run aggregate supply
define cyclical unemployment

cause by a business cycle recession

define GDP

the market value of all final goods and services produced in a country during a period of time, typically a year
define aggregate demand curve

a curve that shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government