Chapter 10 Flashcards
What is aggregate demand?
Total demand for all goods and services in a society
As price rises, aggregate demand falls
When does equilibrium occur?
When AS + AD intersect:
- Full employment
2.Recessionary Gap - Inflationary Gap
List changes in aggregate demand LIST ONLY: GIFC
① government spending
② investment
③ foreign trade
④ changes in consumption
Changes in aggregate supply LIST ONLY: PEA
① price of inputs
② efficiency
③ amount of inputs available
Explain the term business cycle
Business cycle measures the ups downs of the economy, measured by real GDP
What happens during a expansionary period?
Increase production, deceased unemployment,
Increased consumption
What occurs during a recessionary period?
Decease production, increase unemployment, decreased consumption
Expansionary policy ____ AD
Contractionary policy ___ AD
Increases
Decreases
EXPANSIONARY PERIOD:
Tax rate ____
Government spending ____
Both are ____ effects
Decreases
Increases
Indirect
RECESSIONARY PERIOD:
Tax rate ____
Government spending ____
Both are ____ effects
Increases
Decreases
Direct
Welfare, employment insurance, progressive tax rates are all examples of what?
Automatic stabilizers: can bring AD up + down when desired
What is the governments ability to expand or even the money supply in the economy?
Monetary policy
If increase rate go up → ___ borrowing
If increase rate go down → ___ borrowing
Less
More
The governments ability to alter expenditure, tax, and borrowing to achieve economic goals
Fiscal policy
What on the 3 government budget options?
①DEFICIT: government spends more than they have
②SURPLUS: government spends less then they have
③ BALANCED: speeds equal amount to collect taxes
