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