BEC 5 M1: Economic and Business Cycles

Question 1

TWICE Gov changes that cause output to fall

Answer 1

Taxes: Increase
Wealth: Decrease-
Interest Rates: Increase
Consumer confidence: increase
Exchange Rates: increase
Government Spending: decrease

Question 2

multiplier effect

Answer 2

multiplied increase in the level of economic activity that results from increased spending in the economy (marginal propensity to consume)

Question 3

Change in GDP resulting from government spending

Answer 3

Government spending/(1-Marginal Propensity to Consume)

Question 4

Define GDP

Answer 4

Total monetary value of goods and services produced within a nation in one year

Question 5

stagflation

Answer 5

results from a declining output and rising prices due to a decrease in aggregate supply

Question 6

Potential nation inome

Answer 6

potential GDP, aka Long Run Aggregate Supply