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Economics > Chapter 10 & 11 Test > Flashcards

Chapter 10 & 11 Test Flashcards

(61 cards)

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1
Q

What is Aggregate Demand

A

Quantity of output (RGDP) which individuals, businesses, governments, and foreign buyers will purchase at various price levels.

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2
Q

What are the four categories of Aggregate Demand?

A

Consumption, Investment, Government, Exports

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3
Q

An increase in consumption, investment, government spending, or exports leads to?

A

An increase in Aggregate Demand

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4
Q

A decrease in consumption, investment, government spending, or exports leads to?

A

A decrease in Aggregate Demand

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5
Q

What causes a change in Consumption?

A

Disposable income (income-taxes)
Consumer expectation about the economy
Population

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6
Q

Optimism leads to what?

A

more spending

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7
Q

Pessimism leads to what?

A

less spending

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8
Q

What is the fertility rate?

A

Birth vs. death rate

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9
Q

What causes change in Investment?

A

Interest rates and Profit expectations

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10
Q

What do lower interest rates lead to?

A

Increased borrowing and spending

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11
Q

Higher interest rates lead to what?

A

decreased borrowing and spending

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12
Q

Changes in interest rates are more sensitive to who?

A

Businesses

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13
Q

Optimisms in profit expectations leads to what?

A

more spending on capital goods

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14
Q

Pessimism in profit expectations leads to what?

A

less spending on capital goods

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15
Q

Increased government purchases will cause what?

A

Aggregate demand curve to shift to the right

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16
Q

What is aggregate supply?

A

Quantity of output (RGDP) which sellers (business and governments) will sell at various price levels.

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17
Q

An increase in RGDP = what?

A

Economic Growth

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18
Q

What are the three ranges of the Aggregate Supply Curve?

A

Keynesian, Intermediate, and Classical

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19
Q

What is the status of an economy in the Keynesian range?

A

Economy in recession or recently in recession, Real GDP at low level.

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20
Q

In the Keynesian range, an increase in AD leads to what?

A 
Output increases (economic growth)
Price stays the same
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21
Q

In the Keynesian range, a decrease in AD leads to what?

A 
Output decreases ( recession)
Price stays the same
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22
Q

In the intermediate range, what becomes a concern?

A

Inflation

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23
Q

In the intermediate range, an increase in AD leads to what?

A 
Output increases (economic growth)
Price increases ( demand-pull inflation)
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24
Q

What is the employment outlook like in the vertical portion of the aggregate demand curve?

A

Full employment

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25
In the intermediate range, a decrease in AD leads to what?
``` Output decreases (recession) Price decreases (deflation) ```
26
Increase in output is what?
economic growth
27
Decrease in output is what?
recession
28
Decrease in Prices is what?
deflation
29
Increase in Prices is what?
inflation
30
What are 2 supply shifters?
Change in Business Costs and Change in Productivity.
31
Increased costs will what?
decrease supply
32
Decreased costs will what?
increase supply
33
What is the best economic scenario ever?
anti-inflationary economic growth
34
Government policy used to increase aggregate supply is called what?
Supply-side Economics
35
Increase in Supply creates what?
anti-inflationary economic growth
36
What has the most positive impact on the economy?
Increases in Aggregate Supply
37
Decreases in AS leads to what?
price increases and output decreases
38
What is the term for inflationary recession
stagflation
39
Decreases in what have a more negative impact on the economy than any other changes?
Aggregate supply
40
What is government spending and tax policies designed to shift the AD curve?
Discretionary Fiscal Policy
41
Government actions to increase AD in order to increase real GDP when the economy is experiencing slow growth or recession
Expansionary Fiscal Policy
42
Expansionary fiscal policy will create or increase what?
budget deficit
43
Two methods used in expansionary fiscal policy
Increase government spending or decrease taxes(which increases disposable income, which increases consumption)
44
Government actions to prevent an increase in AD in order to keep prices from increasing greatly when the economy is at full employment and consumer spending tends to increase greatly
Contractionary Fiscal Policy
45
Contractionary fiscal policy will create what?
budget surplus, or reduce a deficit
46
What is the keynesian Multiplier rule?
Any increase in spending will lead to a greater increase in total spending (AD) Money is spent and re-spent many times
47
The change in consumption spending resulting from a given change in income is what?
Marginal Propensity to Consume (MPC)
48
What is the multiplier formula?
M=1/1-MPC
49
The change in total spending (AD) resulting from an initial change in taxes (T) is what?
Tax Multiplier
50
If the MPC is .80 what is the multiplier?
5
51
If MPC is .75 and (G) increases by $50 billion, what happens to AD?
increases by $200 billion
52
What is the tax multiplier?
1-spending multiplier
53
If MPC is .75 and taxes are decreased by $50 billion, what happens to AD?
$150 billion
54
The increase in government spending is what?
An increase in spending right away
55
TO maintain a balanced budget what must occur?
both (G) spending and (T) must be changed by the same amount
56
If MPC=.75, and (G) increases by $50 billion and (T) increases by $50 billion what happens to AD?
Increase by $50 billion
57
If MPC=.8, (G) increases by $100 billion and (T) decreases by $100 billion what happens to AD?
Total change in AD is $900 billion
58
Government policies designed to increase aggregate supply are what?
Supply-side fiscal policy
59
In the 1980's supply side policies focused on what?
tax cuts for individuals (workers have incentive to work harder and longer leading to an increase in productivity, and AS
60
What were some shortcomings of the 1980s supply side policies?
Tax cuts may increase aggregate demand more than aggregate supply Tax cuts may not lead workers to work harder or longer
61
Other supply-side fiscal policies
Decrease business costs, and increase technology

Economics (1 decks)

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