Chapter 13 Flashcards
What will increase Aggregate Demand?
a tax cut an increase in gov't spending M1 increasing positive household expectations businesses with positive expectations increased business cash flow increase consumer confidence lower household debt
What will decrease AD?
M2 decreasing Higher interest rates Recessions in foreign countries A strong/appreciating dollar A corporate tax hike A degrease in G spending M1 decreasing
What determines Aggregate supply in the long-run?
amount/quality of resource including level of capital stock and level of technology
Does a change in the price level change output? (Long-run aggregate supply)
no
An increase in LRAS is called
Economic Growth
What will shift LRAS right?
more resources, better technology
What will shift LRAS left?
fewer resources, worse technology
In the short-run, an increase in the price level will cause output to
increase
the price of inputs, such as labor and natural resources, are “sticky” in the short-run, which means that
slow to change
if goods prices rise in the short-run (CPI increases), an increase in output can blank profits
if good prices rise in the short-run (CPI increases), an increase in output can increase profits
What will increase SRAS?
Energy prices decrease
Productivity increases
Technology improves
What will decrease SRAS?
wages increase
materials costs increase
what is a supply shock?
most widely used
decrease in SRAS
negative value
Which way will it shift?
left
What happens to prices and GDP?
prices increase, GDP decreases
***stagflation
