Flashcards
Macroeconomics Chapter 11
Cards in this deck (22)
- 1In a private economy, what are the two components of aggregate expenditures?Consumption (C) and Gross Investment (Ig)
- 2What is a private closed economy?One without international trade or government
- 3What is the Equalibrium GDP equation?C + Ig = GDP
- 4What makes a graph reach equilibrium?A) GPD = C + I
B) No unplanned inventory
C) Saving = Income
D) All the above
Answer: D - 5In a private closed economy, aggregate expenditures consists of what?Consumptions plus investments
* C + I - 6Equilibrium GPD is...C + Ig = GDP
- 7Net Export included in graph- Xn = X -M
- X = M , Xn=0
-X > M , Xn > 0
-X < M , Xn < 0 - 8International Economic Linkage- Propensity abroad : can increase U.S exports
- Exchange rates : depreciation of the dollar to increase exports
- A caution on tariffs and devaluation : other countries may retaliate and lower GDP for all - 9Adding the Public SectorAdding government purchases and taxes (mixed economy)
- 10What are lump-sum tax?Tax of a constant amount or more precisely, a tax yielding the same amount of tax revenue at each level of GDP.
- 11Injections, Leakages, and Unplanned Changes in Inventories- After-tax saving + Imports + Taxes = Investments + Exports + Government Purchases
Equation: Sa + M + T = Ig + X + G - 12At the equilibrium GDPThe sum of the leakages equals the sum of injections.
- 13What is a recessionary expenditure gap?The amount by which aggregate expenditures at the full-employment GDP fall short of those required to achieve the full-employment GDP
- 14What does insufficient total spending do to the economy?Contracts or depresses
- 15How does the Recessionary Expenditure Gap look on the graph?It's the vertical distance(measured at the full employment GDP) by which the actual aggregate expenditures schedule lies below the hypothetical full-employment aggregate expenditure schedule.
- 16What 2 different policies did Keynes point out that a government might pursue to close a recessionary expenditure gap and achieve full employment?1) To increase government spending
2) To lower taxes - 17Equilibrium versus Full-Employment GDPEquilibrium GDP of the aggregate expenditures model is that it need not equal the economy's full employment GPD
- 18Why did Keynes design the model for?-He designed the model so that it could explain situations like the Great Depression
-Also used the model to suggest policy recommendations for the economy back toward potential output and full employment - 19Inflationary Expenditure GapAn economy's aggregate expenditures at the full employment GDP exceeds those just necessary to achieve full employment level of GDP
- 20How does the Inflationary Expenditure Gap look on the graph?The vertical distance between the actual aggregate expenditures schedule and the hypothetical schedule
- 21When did the U.S enter a recession?On December 2007, the U.S economy entered the longest and one of the deepest recessions since the Great Depression
- 22To try to eliminate the recessionary expenditure gap facing the economy, what did The Federal Government do?They undertook various Keynesian policies in 2008-2009
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- Flashcards on Macroeconomics Chapter 11, created by nkauyerlor on 14/04/2015.
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