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Description
Flashcards by jazmin baker, updated more than 1 year ago
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Created by jazmin baker
over 7 years ago
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| Question | Answer |
| What is the multiplier effect? | The effect on equilibrium GDP of a change in aggregate expenditures or aggregate demand |
| To economists the term aggregate means? | Total or combined |
| The fraction of total income that is saved equals the? | Average propensity to save |
| How do you get Real GDP? | Real GDP = Nominal GDP/PL |
| The Real Balance Effect is: | Higher price level reduces the value of the publics accumulated financial assets |
| Interest Rate Effect: | As price level rises so do interest rates, there by reducing some types of consumption and investment spending |
| Foreign Trade Effect: | As price level rises, reduces quantity of Canadian goods demanded as net exports |
| Aggregate Demand (moving along the curve) slopes downward because of what effects on a change in price level? | 1. Real Balance Effect 2. interest-rate effect 3. Foreign trade effect |
| What does AD include? | C+Ig+G+Xn |
| What is Aggregate Supply? | It is a schedule or curve that shows the relationship between the price level of output and the amount of real domestic output |
| What is the immediate short run? | both input prices and output prices are fixed or "Sticky" The curve is horizontal |
| What is aggregate supply in the short run? | The short run is a period of time during which output prices are flexible but input prices are totally fixed or highly inflexible. Upward sloping if price increases so does out put. |
| Determinants of short run aggregate supply: | Change in input prices Change in productivity Change in legal-institutional environment a. business taxes higher =decrease AS b. Government regulation- adding = decrease in AS |
| What is AS in the long run? | all output and input prices are fully flexible Vertical curve |
| What is demand pull inflation? | Increase in AD = increased output, upward pressure on prices, prices increase more quickly and full employment output level is reached |
| What is Cost-push inflation? | A decrease in AS |
| What are the four determinants of AD? | Consumer spending Investment spending Government spending Net Export spending |
| What are the main sources of productivity? | Better trained work force Improved forms of business enterprises Better educated work force Improved production technology |
| Why are wages inflexible? | - wages and salaries are usually only adjusted once a year - minimum wage imposes legal floor - Large parts of the work force works under contracts |
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