CH14 - Aggregate Demand and Aggregate Supply Flashcards
1
Q
AD equation
A
AD = C + I + G + NX
2
Q
The wealth effect
A
The price level affects the purchasing power of money
-> P falls = C falls
3
Q
The interest-rate effect
A
The price level also affects the amount of money people need to purchase the same amount of goods and serves
-> P falls -> I falls
4
Q
The exchange-rate effect
A
Finally, the price level affects the relative cost of exports and imports
-> P falls = NX falls
5
Q
AS curve slope depending on long-medium-short run
A
o (close to) horizontal in the short run
o Upward-sloping in the medium run
o Vertical in the long run
6
Q
factors that shift the LRAS curve
A
- changes in labour (L)
- changes in physical (K) or human (H) capital
- changes in natural resources (N)
- changes in technology (A)
7
Q
factors that shift the AD curve
A
- changes in C
- changes in I
- changes in G
- changes in NX
