13-14 Flashcards
(21 cards)
What is the business cycle?
the squigley line bitch
Is economic growth smooth?
no
What is a recession?
2 consecutive quarters of a decline in real gdp
What happens during a recession?
significant widepread decline in real income and employment
What is the relationship between recession and financial crises?
in a financial crisis recessions last longer?
What causes recessions according to Keynesians?
demand
What causes recessions according to Real Business Cycle?
supply
What causes recessions according to Monetarists?
money supply
What causes recessions according to Austrian?
central banks distort price signals through interest rates
What is aggregate demand?
THINK SPENDING
GDP
c+I+G+NX
price level and real gdp
What shifts the AD curve?
price change is movement along
change in C I (animal spirits, wealth, expectations)
G (fiscal policy)
NX (growth rates abroad, exchange rates, trade agreements)
moves whole curve
What is long-run aggregate supply?
Solow growth rate/potential growth rate
What is the relationship between the Solow growth rate and LRAS?
What shifts LRAS?
Technology (a)
Capital Stock (K)
Lobor and human capital (el)
land
institutions and incentives like property rights, honest government, political stability, competitive markets, dependable legal system
What is SRAS?
relationship between price level and gdp supplied by firms
Where does equilibrium occur in the AD/AS model?
at the intersection
What happens to inflation and real growth when there is a change in AD?
Aggregate goes up: inflation goes up, reaal growth goes up
Aggregate goes down: inflation goes down, growth goes down (recession)
What happens to inflation and real growth when there is a change in SRAS/LRAS?
Decrease/negative: inflation rate up, growth rate down
Positive: inflation rate down, growth rate up
What can shift AD back to equilibrium?
Increase government spending, increase sras
What are the limitations of monetary and fiscal policy with supply shocks?
If they over shoot it causes incredible inflation
What would an economist recommend to prevent/fight recessions?
pay credit card, save, establish emergecy fund, curb consumerism, don’t panic sell, don’t time the market
