final exam knapp

how big is fiscal multiplier

.5-3 seems to be the average

velocity form of money

#times a dollar spednds in a given time period $14.4 currency ($14.4) velocity --> NGDP 14.4 X velocity = 20 T V= 1.39

(M)(V)=

(PL)(Y) this is called the Fischer equation

When the price level rises from 104 to​ 124, real GDP falls from​ $5 trillion to​ $4 trillion. What is a possible explanation for this​ event?

-Falling exports -Less investment -Decreased consumption

AE model goals

1. define the EQ(AE=Y) 2. explain short run fluctuations in the economy - assume that Pl is constant across time

Why don't more low-income countries experience rapid growth?

1. failure to enforce the rule of law 2. wars and revolutiosn 3. poor public education and health 4. low rates of savings and investment

changes of supply loanable funds

1. monetary policy 2. wealth and income levels 3. consumption smoothing 4. changes in the government budget status 5. policies to affect savings directly

Changes in PL changes Y

1. sticky wages(moves real wage) 2. sticky prices of output

economist believe two key factors in labor productivity

1. the quanity of capital avalible to workers 2. the level of technology

decrease in Price level has three effects

1. wealth effect 2. interest rate effect 3. net export effect

(Multiplier) m=

1/1-MPC

Commodity money

A good used as money that also has value independent of its use as money.

how to find number of years to double

70/ annual growth rate

approx. of the time to double in size=

70/ growth rate

If real GDP per capita grows at a rate of 8.2 percent per​ year, it will take ______ years to double.

8.53

the multiplier effect is the process by which...

an increase in autonomous expenditure leads to a larger increase in real GDP.

Aggregate demand curve

A curve that shows the relationship between the price level and the level of planned aggregate expenditure in the​ economy, holding constant all other factors that affect aggregate expenditure.

inflation

an increase in both the inflation and the unemployment rates that may sometimes result in a rightward shift of the SRAS curve.

AE Model: Shocks to Government Spending

Affected by fiscal policy Government wants countercyclical policy

Always wants to go back to EQ no matter if it is a positive or negitive shock As long as the economist is at EQ then it will stay there forever but something upsets the consumers and it causes ripples through economy's firms

AE MODEL talks about this

changing the price moves you along the _______ _____

AE curve

businesses are the most responsive to this sector so it can cause drastic changes

AE model shocks to planned investment

The slope of the aggregate expenditure line equals Aa. the slope of the consumption function. Ba. the value of the multiplier. Ca. equilibrium real GDP. Da. the slope of the​ 45- degree line.

Aa

changes in PL moves along SRAS curve

All things that shift LRAS Increase K/L, Increase technology, increase in health, increase education ALL leads to (-->) increase SRAS Prices of important inputs Poic & Plabor Increase either--> decrease SRAS Updates to firms inflation expectations Increase inflation expectation --> decrease SRAS Decrease Inf exp--> increase SRAS

what can money serve as

Anything: acceptance, standardized, divisible, durable, and valuable Commodity money: has value independent of an item use as money think of cigarettes, they come in cartons packs and more, Fiat money: has no value independent of an item use as money

Briefly explain why the aggregate expenditure line is upward​ sloping, while the aggregate demand curve is downward sloping. As. Aggregate expenditure is the relationship between spending and​ income, while aggregate demand is a relationship between output and the price level. Bs. Aggregate expenditure is the relationship between output and the price​ level, while aggregate demand is a relationship between spending and income. Cs. Aggregate expenditure is the relationship between spending and interest​ rates, while aggregate demand is a relationship between output and factor inputs. Ds. Aggregate expenditure allows the price level to​ vary, while aggregate demand treats prices as a constant.

As

autonomous expendature

does not depends on the level of gdp we use planned investmentspending, gov spending and nex exports

Does economics answer the​ question: ​"Is economic growth​ good?" A. No. This is a positive question. B. No. This is a normative question. C. Yes. We have seen that economic growth is seldom good. D. Yes. We have seen that economic growth is always good.

B.

planned agregate expenditure =

C+I+G+NX

AE=

C+PI+G+NX

Businesses demand loanable funds because A. firms need to borrow funds so that they can pay the wage costs and other recurring expenses of the business. B. loanable fund interest rates are always lower than the rate of return on their new investments. C. firms need to borrow funds for new​ projects, such as building new factories or carrying out new research projects. D. households charge a much higher rate of interest than the going rate of interest in the loanable funds market.

C.

Have poor countries been catching up to rich​ countries? A. There has been no​ catch-up by any of the poor countries. B. There has been​ catch-up among all poor countries. C. There has been​ catch-up by some poor but industrialized countries. D. The rich countries are getting poorer and going down to the level of poor countries.

C.

The economic growth model predicts that the A. rich countries will have stagnant growth and will catch up with the poor​ countries, so that there will be a convergence toward a​ "poverty trap." B. level of per capita GDP in poor countries will decrease over time and the poor nations will not be able to catch up with the rich nations. C. level of per capita GDP in poor countries will increase faster than rich countries and the poor nations will catch up with the rich nations. D. level of per capita GDP in rich countries will increase so fast that it will be difficult for poor countries with low income per capita to ever catch up with the rich countries.

C.

If there is an increase in the marginal propensity to consume​ (MPC), then Ac. the level of consumption expenditures will decrease. Bc. the increase in the MPC will not affect the equilibrium amount of output in the aggregate expenditure model. Cc. the value of the expenditure multiplier will increase. Dc. the value of government purchases will increase.

Cc

change in consumer behavior

Change disposable income Change wealth levels Changes consumption smoothing Change interest rates

The formula to calculate the change in government spending comes​ from:

Change in GDP equals Multiplier times Change in Government Spending.

changes to net exports

Changes in forced exports Changes in growth rates Changes REL prices

changes in government spending

Changes in the over all level it means you increase Gov spending or decrease gov spending Increase or decrease taxes

What is a contractionary fiscal​ policy?

Contractionary fiscal policy includes decreasing government spending and increasing taxes to decrease aggregate demand.

a negative shock makes AE go

down increase in inventory so you have to fire labor and capitol

Economic growth will A. not be affected because the key to economic growth is capital accumulation whether there are diminishing returns or not. B. be faster if more capital per hour is used because of increasing returns to capital. C. not be sustained if developing countries stop accumulating capital because of diminishing returns to capital. D. slow down or stop if more capital per hour is used because of diminishing returns to capital.

D.

Why do economic growth rates​ matter? A. High growth rates coincide with improved living standards. B. When a country sustains high growth​ rates, life expectancy at birth increases. C. High levels of sustained economic growth reduce infant mortality. D. All of the above. A and C only.

D.

unit of account

When each good has a single price quoted in terms of the medium of​ exchange, money serves as a unit of account. It provides a way to measure value in the economy in terms of money.

As a​ result, an increase in the price level causes a _______ _______ of the aggregate expenditure line.​

downward shift

The growth in U.S. real government purchases AE. trends smoothly upwards and downwards at regular intervals. BE. follows an erratic upward trend that is unrelated to the timing of recessions or the size of budget deficits. CE. declines significantly during​ recessions, like the growth in real investment spending. DE. tends to be​ positive, but has fallen in recessions and in response to concerns about the size of budget deficits.

DE

The multiplier effect is the process by​ which: Ab. an increase in real GDP or income leads to an increase in consumption. Bb. an increase in aggregate expenditure leads to an increase in inflation. Cb. an increase in real GDP leads to a larger increase in autonomous expenditure. Db. an increase in autonomous expenditure leads to a larger increase in real GDP.

Db

Which of the following statements regarding wealth and income is​ correct? AA. Wealth is the amount of income households have in order to spend and save. BA. Wealth is the amount of assets held by government and income is the amount of taxes collected by government. CA. Wealth and income can be considered identical measures of what people have to spend. DA. Wealth represents the total value of a​ household's assets minus its liabilities while income is the amount of earnings households receive in the current period.

DA

Would a larger multiplier lead to more severe recessions or less severe​ recessions? Ab. A larger multiplier means that large changes in spending lead to small changes in​ GDP, and thus recessions would be more severe. Bb. A larger multiplier means that small changes in spending lead to large changes in​ GDP, and thus recessions would be less severe. Cb. A larger multiplier means that large changes in spending lead to small changes in​ GDP, and thus recessions would be less severe. Db. A larger multiplier means that small changes in spending lead to large changes in​ GDP, and thus recessions would be more severe.

Db

Reserves

Deposits that a bank keeps as cash in its vault or on deposit with the Federal Reserve.

Which of the following will increase planned investment spending on the part of​ firms? A. Increased optimism about future demand for its product B. A lower real interest rate C. Increases in the corporate income tax D. All of the above E. A and B only

E

why does The Federal Reserve uses two definitions of the money​ supply, M1 and​ M2, because

M1 is a narrow definition focusing more on​ liquidity, whereas M2 is a broader definition of the money supply.

What is an expansionary fiscal​ policy?

Expansionary fiscal policy includes increasing government spending and decreasing taxes to increase aggregate demand.

AE Model: Shocks to Planned Investment

Expected expectations of future profits (+) Interest rates(-) Taxes (-) Retained earnings (+)

C=

F(DI)

difference between commodity money and fiat money

Fiat money has no value except as​ money, whereas commodity money has value independent of its use as money.

changes to investment

Firm profits Interest Rates (higher interest rates shift it left.) Retained earnings (earnings within the firm)

what is the fiscal policy?

Fiscal policy can be described as changes in government spending and taxes to achieve macroeconomic policy objectives.

what is Y

GDP and house hold income

m2

M1+ small time deposits (savings accounts and small CDs)+ some money marketing accounts

issues with fiscal policy

Government expenditure is a small share of GDP Governet is only 20% of GDP Fiscal Policy only counts as half of government spending Discretionary spending is the powerful piece... and its shrinking in relative importance Fiscal has to do with national stuff so that's why we split the government spending in half

at EQ the PI= ___

I (investment)

5. policies to affect savings directly

IRA, 401K increase generosity--> increase Slf decrease generosity--> decrease Slf

AE Model: Shocks to Net Exports:

Increase in the relative price of US goods (-) Increase in growth in US relative to the world (-) Exchange rate fluctuations $increase in value(-) $ decrease in value (+)

AE moel shocks to Net Exports

Increase in the relative price of US goods (-) Increase in growth in US relative to the world (-) If the US grows then we will important more goods but if the rest of the world is not growing then we wont have any imports (net exports would fall) Exchange rate fluctuations(gets most press) $increase in value(-) $ decrease in value (+) If Chinese goods are cheaper than we would import more chinses good than we normally would but that would hurt our exports because we would be importing a lot more than exporting A reserve currency We don't deal with this as much as other counties When you trade between countries it goes by the dollar so people don't have to deal with it like other countries because they have euro or yin Can negatively affect US if we don't important and export

Medium of exchange

When sellers of goods and services are willing to accept money in exchange for goods and​ services, then money serves as a medium of exchange. An economy is more efficient when a single good is recognized as a medium of exchange.

PL

price level

Aggregate Expenditure (AE) model

Keynes basic way of trying to explain what was happening in the economy Defines macroeconomic equilibrium

dynamic model

LRAS moves over

Long run Aggregate supply

Long run aggreage supply: a curve that shows the relationship in the long run between the price level and the qualnity of real GDP supplied No relationship between change in PL and change in Y(real GDP)

LEAS

Long run aggregate supply

3. consumption smoothing

talks about our desire to consumers across time periods

what is money

Medium of exchange: eliminates barter as sole means of trade between items X and Y. Both "owners" willing to accept item Z instead. Easily DOUBLE COINCIDENCE OF WANTS Increases the amount of trade (the other person in the trade has to want what we have for double coincidence of wants) Unit of account: puts prices into terms of trade based on one common item Store of value: allows economic value to be moved across time periods. Allows for borrowing and saving (AKA: standard if deferred payment)

store of value

Money allows value to be stored easily. What you​ don't use​ today, you can use next week. That​ is, money tends to be durable such that its value is not lost by spoilage.

standard of deferred payment

Money can facilitate exchange over time by acting as a standard of deferred​ payment, which is useful in lending and borrowing.

Fiat money ​

Money, such as paper​ currency, that is authorized by a central bank or governmental body and that does not have to be exchanged by the central bank for gold or some other commodity money.

closed economy

NX=0

sticky wages

REAL WAGExx= (NOM WAGExx/CPIxx) X 100 Real wages go down, labor is becoming cheaper, which means people consume more Increase CPI --> decrease in wage--> increase amount of labor--> increase Y(real GDP)

types of lags is fiscal policy

Recognition lag Administrative lag Operational lag How powerful is this stimulus? Simple multiplier: M= 1/(1-MPC) Total change in Y - (M) X (SHOCK) `

shocks to aggregate demand

Rightward shift= positive shock Leftward shift= negative shock Shock caused by "animal spirts" Same list as shocks to aggregate expenditure Remember AD= f(C,I,G,NX)

sticky prices of output

Some companies have "menu costs" The higher menu cost, the less likely you will up your prices You will bare menu costs to reinstate the amount of prefits you gain Increase in CPI --> constant output prices cause real price to decrease and increase sales -----> increase Y(GDP)

public savings=

T(tax revenue) -TR(transfer payments)-G(gov purchases of goods and services)

total savings =

T-C-G

budget deficit

T< TR+G

budget surplus

T> TR+G

required reserve ratio

The minimum fraction of deposits banks are required by law to keep as reserves.

M1

The narrowest definition of the money​ supply: The sum of currency in​ circulation, checking account deposits in​ banks, and holdings of​ traveler's checks.

multiplier

The ratio of the increase in equilibrium RGDP to the increase in autonomous expenditure.

Aggregate expenditure​ (AE)

The total amount of spending in the​ economy: the sum of​ consumption, planned​ investment, government​ purchases, and net exports.(AE)`

fiscal policy

Who does it? Federal level only Don't consider state and local spending as fiscal policy What counts as fiscal policy Must be deliberate attempt to change economic outcome Discretionary vs. Automatic (UE benefits and taxes) Spending or tax

AE=

Y(GDP) (that is the macro EQ)

private savings =

Y(household income)+TR(transfaer payment)-C(consumption)-T(tax)

unplanned change in inventory =

Y-AE

price level

a measure of the average prices of goods and services in the economy

supply shock is

a sudden increase in the price of an important natural resource, resulting in a leftward shift of the SRAS curve

what is a subsidy

a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.

stagflation occurs when

a supply shock shifts the SRAS to the left, increasing the price level and decreasing actual GDP

D(LF)<-- lowercase

borrowers or firms (people who want to do research and build new factories and stuff)

monetary policy

actions the federal goverment- the nations central banks- takes to manage the money supply and interest rates and to ensure the flow of funds from lenders to borrowers

AD

aggregate demand

The two key factors that cause labor productivity to increase over time are A. better environmental standards and stricter labor laws. B. the quantity of capital per hour worked and the level of technology. C. the decline in unionization and slacking of labor laws. D. the quantity of labor per hour worked and the level of technology.

b.

net exports wil finn if echange rate between the dollar and foriegn currencies rise

because the price in foreign products sold in the US will fall

how is money created

by the goverment or banks create it through lending

An increase in the growth rate of US GDP will​ (increase/decrease) net exports.

decrease

In​ particular, the size of the health care sector in a developing country A. falls since the developing country depends more on the advanced countries for their medical needs. B. grows as the government provides more subsidy. C. grows with economic prosperity as life expectancy increases. D. falls with economic prosperity as life expectancy increases.

c.

Some economies are able to maintain high growth rates despite diminishing returns to capital by using A. a larger proportion of​ capital, thereby making their production capital​ intensive, so the sheer volume of capital protects them from diminishing returns to capital. B. a​ labor-intensive technology because​ labor, unlike​ capital, is not subject to diminishing returns. C. better or enhanced​ technology, along with accumulating​ capital; these economies are growing because​ technology, unlike​ capital, is subject to increasing returns. D. a newer production method​ that, if used​ properly, produces increasing returns to capital.

c.

The financial system of a country is important for​ long-run economic growth because A. most firms rely on their own retained earnings and do not use the financial system. B. people can increase their wealth very quickly under a healthy financial system. C. firms need the financial system to acquire funds from households. D. firms that use the financial system predominantly are being reckless.

c.

Which of the following is not a​ "loanable fund"? A. Bonds. B. Mutual fund shares. C. Real estate. D. Bank certificates of deposit.

c.

pozitive statement

can be tested and rejected. deals with objective explanation and the testing and rejection of theories. For example: A fall in incomes will lead to a rise in demand for own-label supermarket foods.

A change in the price level causes

causes a movement along the aggregate demand curve

monetary policy is decided by

central bank

variable that shift aggregate demand

chagnes in goverment policy changes in the expecations of households and firms changes in foriegn variables

how to find MPC

change in consumption/ change in income (make sure you do new- old for each category first to find the change)

how to find MPS

change in savings/ change in income (you have to make sure you find the amount changed by subtracting one year from another)

M= change Y=

change y/shock (m)(shock)

Changes in consumer behavior

changes in disposable income changes in wealth levels changes in consumption smoothing changes in interest rate

changes in net exports

changes in forced export changes in in growth rates changes REL prices

The​ long-run aggregate supply curve is vertical because in the long​ run

changes in the price level do not affect potential​ GDP, as potential GDP depends on the size of the labor​ force, capital​ stock, and technology.

when an expenditure is drawn, the price level is held _____

constant

AE function starts with ____ and then ___ ___ ___

consumption and adds other elements

real GDP per capita is the best measure of a .....

countries standard f living becaise it represents the ability of the average person to buy goods and serives

M1

currency in circulation + demand deposits (checking accounts)+ travelers checks (this is changing)

AE model shocks to consumption

current disposable income (+) household wealth (+) expected future income(+) interest rates (-)

Inventories refer to A. goods that are a result of new inventions. B. goods that are kept in storage to be shipped to foreign countries. C. outstanding orders that companies have for future production. D. goods that have been produced but have not yet been sold.

d

The relationship between the marginal propensity to consume​ (MPC) and the marginal propensity to save​ (MPS) can best be described as A. MPS​ = 1minusMPC. B. MPC​ + MPS​ = 1. C. MPC​ = 1minusMPS. D. All of the above.

d

Households supply loanable funds because of the A. profit income earned from running a​ money-lending business. B. wage income earned from working in the financial markets. C. rent income they receive as resource owner. D. interest income received from the borrowers.

d.

When examining economic growth rates throughout​ history, A. the world experienced little to no growth until the industrial​ revolution, after which all of the​ world's economies began to experience real economic growth. B. almost no growth occurred prior to 1300 AD and then all countries of the world grew at a rapid pace. C. it appears that the world experienced consistent growth since records have been kept. D. the world experienced little to no growth until the industrial​ revolution, after which some economies began to experience real economic growth.

d.

if the price level​ increases then the consumption​ spending, planned investment spending and net exports all ___________.

decline

An increase in the US price level relative to other countries to other countries price levels will​ (increase/decrease) net exports.

decreases

2. wealth and income increase wealth--> increase _________ ______ increase income ---> Increase _______ _______

desire to save level of savings

inflation _______ the purchasing power of money

destroys

If the government raises the amount of​ taxes, holding everything else​ constant, then

disposable income will decrease

Di IS

disposable income(what is left after taxes)

compare actual GDP to potential GDP and measure the size of gap

expansiary gap

short run if EQ economy operates above potential GDP it shows a _______ period

expansionary

An increase in the exchange rate will​ (increase/decrease) net exports.

fall

At the beginning of a recession, AE ________ of GDP as a result firms ▼ accumulate reduce large amounts of unplanned inventory and GDP and employment ▼ decrease remain the same increase .

falls short of accumulate decreases

who is responsible for the fiscal policy

federal goverment

Us dollars can be best described as

fiat money

changes to investment

firm profits interest rates retained earnings (earnings within the firm)

aggregate expendature model

focuses on the short run relationship between total spending and real GDP assuming that price level is constant

economic growth occurs when

gdp per caita increases

What is the difference between federal government purchases​ (spending) and federal government​ expenditures?

government purchases are included in government extendatures

1. monetary policy if you increase money supply then you _______ savings

increase

economic growth rates

increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

a lower price level will decrease the interest rate and

increase investment speding, thereby increaseing the quanitiy of goods and services

stagflation is a combination of

inflation and recession

multiplier effect occurs when

initial increase in autommous expendature sets off a series of increase in GDP

i

interest rate

a higher price level will increase the interest rate and reduce

investment spending, therby reducing the quanitity of goods and services demanded

Contractionary fiscal policy

involves decreasing government purchases or increasing taxes. Decreasing government purchases decreases aggregate demand directly becuase government purchases are a component of aggregate demand. Increasing taxes decreases disposable income​ which, in​ turn, decreases consumption by households and firms.

Expansionary fiscal policy

involves increasing government purchases or decreasing taxes. Increasing government purchases increases aggregate demand directly becuase government purchases are a component of aggregate demand. Decreasing taxes increases disposable income​ which, in​ turn, increases consumption by households and firms.

rule of 70

is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double.

fiscal policy

is the changes in federal taxes and purchases that are intended to achieve macroeconomics policy objectives

fiscal policy

is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply. there are timing issues in this

labor productivity

is the quanitity of goods and services that cna produced by one worker or by one hour of work

expansiary fiscal policy does what to GDP and unemployment

it creates unemployment and increases GDP

principle of a double coincidence of wants.

lacking a medium of exchange both parties have to agree to sell and buy each commodity

M1 is more ___ than M2

liquid

if we dont save more than we spend then we have ______ economic growth

lower

Function of money

medium of exchange unit of account store of value standard or deferred payment

Capital per hour worked increases from 5 million per hour worked to 6 million per hour worked. This will cause a _______​China's per-worker production function. movement or shift?

movement

what is "m"

multiplier

equation to find savings

national income(also Real GDP)- Consumption(c)

Into which category of aggregate expenditures would the following transaction​ fall? San Diego public school district buys 12 new buses ▼ Consumption expenditure Investment expenditure Net export expenditure Government expenditure

new buses represent a government expenditure

foreign portfolio investment

occurs when an indivisual or firm buys stocks or bonds issued in another country

foreign direct investment

occurs when corpration build or purchase facilities in foriegn countries

animal spirt

people feeling more or less secure about buying things

what does PI stand for

planned investment (doesn'ta use actual change in inventory)

Ȳ=

potential GDP

fiscal is run by

president and congress

whatever is left over from private savings is____

private consumption

total savings =

private savings + public savings

a__________ in the price level causes an upward shift of the aggregate expenditure line.

reduction

increase in human capitol

refers to physical capitol, including computers, facotires, machine tools, warehouses, and trucks the more physical capitol workers have avalible, te more output they can product

rule of law

refers to the ability of a goverment to enforce the laws of the country, particulary with respect to protecting private property ad enforcing contracts

Usually at the beginning of a​ recession, inventories ▼ rise fall remain unchanged ​, but at the beginning of an​ expansion, inventories ▼ rise remain unchanged fall .

rise fall

S(LF)<-- lowercase

savings

Upper A technological change will cause the​ long-run aggregate supply curve to

shift to the right

an increase in interest rates

shifts AD curve to the left because higher interest rates raises the cost to house hold and firms borrowing, reducing consumption, and investment spending

an increase in goverment purchases

shifts AD curve to the right because goverment purchase are a compenonet of AD

SARS

short run aggregate supply

aggregate demand curve

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

short-run aggregate supply curve

shows the relationship in the short run between the price level and quantity supplied of real GDP supplied by firms

MPC=

slope of consumption

Think about the relationship between economic prosperity and life expectancy. The size of the health care sector in a less developed country is __________ the size of the health care sector of a developed country.

smaller than

consumption smoothing

spending amount different time periods

diminishing returns to capitol

stated as a law or principle, that when any factor of production, as labor, is increased while other factors, as capital and land, are held constant in amount, the output per unit of the variable factor will eventually diminish.

normative statement

statement which describes how the world should be. Not factual

4. changes in government budget status talks about crowding Increase deficits —> decreasing _______

supply

wealth and income are directly effected to the

supply

M

supply of money

Aggregate expenditure represents

the amount of spending that occurs in an economy

autonomous expenditure

the consumption expenditure that occurs when income levels are zero. Such consumption is considered autonomous of income only when expenditure on these consumables does not vary with changes in income; generally, it may be required to fund necessities and debt obligations.

sustain economic growth didnt start until_____`

the industrial revoluion

seigniorage

the more money that is created, the higher the price level goes up Seigniorage, is very limited on what it can really do. This causes massive amounts of inflation

a fall in price level increases

the quanitity of real GDP demanded

multiplier effect

the series of induced increases in consumption spending that results from an initial increase in autonomous expenditures

aggregate demand and supply explain

the short run fluctuations in real gdp and the price level

definition from keyness

total spending = total production

TR

transfer payments

True or false: supply is all about savor behavior

true

property right (book example)

unless entreprenunuers feel secure in thier property, they will not risk starting a business

a positive shock makes AE go

up decrease in inventory so you have to hire more labor and capitol

V

velocity

three effects that Decreasing PL has

wealth effect interest rate effect net export effect

what will always represent the EQ on the graph?

when AE line intersects with the 45 degree line

Government budget status

whether the government is running a surplus or deficit

globalization

which refers to the process of countries becomming more open to foreign trade and investment

the model of economic growth helps us anwer these important questions

why have countries such as US and UK have such a high standard of living? why have countries such as argentina, which at one time had reitivly high standsard of living but failed to keep pace? why are some countries so poor? what explains chinas very rapid recent growth rate?

If there is an increase in​ technology, holding constant the quantity of capital per hour​ worked, then...

you would jump to a different curve

If there is an increase in capital per hour​ worked, holding technology​ constant, then...

you would move along the same curve

Gap=

ȳ-Yb