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Econ 114 > 4.1-4.4 > Flashcards

4.1-4.4 Flashcards

(78 cards)

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1
Q

depends on the production function of a country

A

aggregated output or supply (GDP)

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2
Q

taken together, capital, labour, natural resources constitute a Nation’s-State’s

A

factor endowment

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3
Q

what are the 3 forms of labour

A
  1. productive
  2. managerial
  3. entrepreneurial
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4
Q

productive, managerial, and entrepreneurial are embody

A

personal knowledge

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5
Q

a governing body of an organization regarded collectively

A

management

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6
Q

the role of management is to make _____ available so that production workers can works tasks and markets can distribute ______

A

inputs

outputs

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7
Q

most major corporations follow a

A

hired gun or business entrepreneur

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8
Q

entrepreneur comes from the french words

A

entre, prendre

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9
Q

involves seeing and realization a vision of future markets, products and opportunities and leads the organization in realizing that vision

A

entrepreneurial knowledge

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10
Q

is constantly evolving

A

natural resources

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11
Q

at first glance has no relationship to knowledge, but new knowledge lets us see it in a different light

A

natural resources

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12
Q

refers to the impact of new knowledge on the production function of a firm/nation

A

technological change

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13
Q

known as the measure of our economic ignorance

A

Solow Residual

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14
Q

symbolic equation for production function

A

Y=f(K,L,T)

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15
Q

what percentage of growth in national income us attributable to changes in quantity and quality of K and L, and what % is attributable to technological change

A

25%

75%

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16
Q

the economic effect of solow residual was called

A

creative destruction

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17
Q

in response to technological change, the production can shift up or down because

A

technology can be found or lost

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18
Q

a new production function can emerge with

A

innovation and/or elimination

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19
Q

2 supply surves

A
  1. short-run aggregate supply (SAS)

2. long-run or potential aggregate supply (LAS)

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20
Q

aggregate expenditure, demand and the SAS abd LAS results in the

A

Keynesian double cross

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21
Q

is the 45 degree line

A

Keynesian cross

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22
Q

equilibrium is with respect to both

A
  1. current (short run) equilibrium

2. potential (long run) equilibrium

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23
Q

SAS is plotted assuming ______ remain constant

A

nominal factor prices

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24
Q

if the overall price level rises in the SAS then what happens to real factor prices and production?

A
  1. decline

2. increase

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25
why does an increase in price level result in increased production
because revenue goes up while costs remain the same (profit increase)
26
why is the SAS upward sloping
because as production grows prices rise
27
higher prices for g/s with lower real factor cost in production _______ profits and encourages firms to _______
increases | supply more
28
shifts in the SAs can occur due to (2)
1. change in any factor costs | 2. technological change
29
SAS is the summation of supply curves all producing _______ in an economy and react the same to _______
- enterprise | - changes in final and factor prices
30
in the classical model it is assumed money wages and prices are
perfectly felxible
31
when money wages and prices are perfectly flexible an increase in demand
raises prices rather than expand output
32
SAS is
inelastic or even vertical
33
Keynes believed that money wage was not
perfectly flexible but sticky
34
exhibits forward looking expectations
business
35
under the Keynesian model sticky wages results in a SAS curve with a
relatively gentle upward slope
36
in the classical and new classical model, flexible wages and prices result in a very _________ SAS curve
inelastic or even vertical
37
the difference in the slope of the SAS curve has significant implication for
fiscal and monetary policy
38
is found when all available factors of production are fully employed
long-run aggregate supply curve
39
LAS is vertical, so there can be no _______ since factors of production are fully employed
increase in output
40
LAS corresponds to
potential real GDP
41
LAS corresponds to potential real GDP , that is the
max output attainable given the existing supply of factors of production
42
movement up or down the LAS curve is caused by a change in (2)
1. aggregate price level for final g/s | 2. factor prices
43
if final prices go up what happens to factor prices
rise at the same rate
44
if final prices go up, meaning factor prices rise at same right means that these 3 things remain constant
1. real wage rate 2. other factor prices 3. real GDP
45
LAS shifts right or left if there is an increase or decrease in
available factors of production
46
the key for movement along SAS is the
labour market
47
movement up along the SAS curve means real GDP ____ as price level ____ because unemployment _____ as real wage rate ______ with nominal or money wages ______
``` rises rises falls falls fixed ```
48
the natural rate of Ue is
full employment
49
how is the natural rate of Ue (full employment) achieved
when SAS measured by real GDP attains LAS
50
the natural rate of Ue does not equal 0 but rather reflects
frictional and structural Ue
51
if one moves along SAS beyond LAS (potential GDP), factor prices
will increase
52
while in short run, output may exceed potential but cannot be maintained because
competition for fully employed factors of production raises their cost causing production to drop, shifting SAS to the left
53
shifts in SAS occurs because of _____, affecting a _____
- changes in real factor prices | - firm's costs of production
54
LAS does no shift because with changing factor prices because
factors and inputs are fully employed
55
shifts in both SAS and LAS are caused by
1. changes in quantity of K and L | 2. advances in technology
56
purpose of the AD/AS model is to
understand and predict changes in real GDP and price level
57
there are both short-run and long-run points of
equilibrium
58
short-run equilibrium occurs when
SAD=SAS
59
if final and factor prices tend to be higher than consumers are willing to pay the firms will
cut production, lower prices, and factor prices will tend to fall
60
to bring SR back to equilibrium when real GDP is higher than equilibrium firms will
cut production, lower prices, and factor prices will tend to fall
61
if real GDP is is less than equilibrium, prices will
increase until equilibrium is achieved
62
if SR equilibrium is less than potential real GDP or full employment there is a
recessionary gap
63
if SR equilibrium is more than potential real GDP or full employment there is an
inflationary gap
64
in a recession factor prices are depressed causing cost of production to ____ and output to _____
fall | increase
65
during inflation factor prices are ____ causing the cost of production to _____ and output to _____
elevated rise fall
66
shifts in _____ are measured by the growth rate of potential GDP
LAS
67
results when the rate of growth of aggregate demand is greater than long-run aggregate demand
inflation
68
a major factor affecting the rate of growth of AD is the
quantity of money
69
if the money supply grows faster then LAS what occurs
inflation
70
if the money supply grows slowly, inflation
grows slowly
71
if world economy grows faster than the domestic economy, demand for exports
increases
72
if the world economy grows faster than the domestic economy this shifts the domestic economy
out of equilibrium with LAS
73
If SAS curve shifts to the left out of equilibrium with potential GDP, what is created
a recessionary gap but at a higher price level
74
a recessionary gap but at a higher price level is a combination of
recession and inflation
75
the combination of recession and inflation is called
stagflation
76
the economy can be in 3 possible states
1. recessionary gap 2. full employment 3. inflationary gap
77
will tend to eliminate inflationary gap and restore full employment
automatic forces
78
there are no automatic forces that will eliminate a
recessionary gap

Econ 114 (7 decks)

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