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Macroeconomics > Chapter 12 > Flashcards

Chapter 12 Flashcards

1
Q

staglation

A

combination of high inflation and rising unemployment

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2
Q

demand shocks

A

Short-run economic fluctuations

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3
Q

Aggregate demand curve

A

Shows the relationship between the aggregate price level and the quantity of aggregate output demanded by households, businesses, the government, and the rest of the world

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4
Q

Wealth effect of a change in the aggregate price level

A

The effect on consumer spending caused by the effect of a change in the aggregate price level on the purchasing power of counsumers assets

Aggregate price level up

Consumer spending Down

*leads to downward-sloping aggregate demand curve

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5
Q

Interest rate effect of a change in the aggregate price level

A

The effect on consumer spending and investment spending caused by the effect of a change in the aggregate price level on the purchasing power of conusmers’ and firms’ money holdings

interest rate up

consumption down

*leads to downward-sloping aggregate demand curve

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6
Q

When consumers and firms become more optimsitic

A

aggregate demand increases

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7
Q

When the real value of household assets rises…

A

aggregate demand increases

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8
Q

When the existing stock of physical capital is relatively small….

A

aggregate demand increases

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9
Q

When consumers and firms become more pessimistic

A

aggregate demand decreases

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10
Q

When real value of household assets falls

A

aggregate demand decreases

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11
Q

When existing stock of physical capital is relatively large

A

aggregate demand decreases

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12
Q

When the government increases spending or cuts taxes

A

aggregate demand increases

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13
Q

When the government reduces spending or raises taxes

A

aggregate demand decreases

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14
Q

When the central bank increases the quantity of money

A

aggregate demand increases

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15
Q

When the central bank reduces the quantity of money…

A

aggregate demand decreases

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16
Q

The prime rate

A

The interest rate banks charge their best customers

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17
Q

aggregate supply curve

A

Shows the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy

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18
Q

Profit per unit of output =

A

Price per unit of output - production cost per unit of output

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19
Q

Wages

A

Refers to all forms of worker compensation, such as employer-paid health care, and retirement benefits in addition to earnings

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20
Q

nominal wage

A

the dollar amount of the wage paid

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21
Q

Sticky wages

A

Nominal wages that are slow to fall even in the face of high unemployment and slow to rise in the face of labor shortages

22
Q

Perfectly competitive markets

A

Producers take prices as given

23
Q

Imperfectly competitive markets

A

Producers have some ability to choose the prices they charge

24
Q

Short-run aggregate supply curve

A

Shows the relationship between the aggregate price level and quantity of aggregate output supplied that exists in the short run, the time period when many production costs can be taken as fixed

25
Q

average nominal wage

A

the nominal wage averaged over all workers in the economy

*falls when there is a steep rise in unemployment

26
Q

When commodity prices fall

A

aggregate supply increases

27
Q

When commodity prices rise

A

aggregate supply increases

28
Q

When nominal wages fall

A

aggregate supply increases

29
Q

When nominal wages rise

A

aggregate supply decreases

30
Q

When workers become more productive

A

aggregate supply increases

31
Q

When workers become less productive

A

aggregate supply decreases

32
Q

Changes in the aggregate price level _____________________________

A

do not change the quantity of aggregate output supplied in the long run

33
Q

Long run

A

the period of time over which all prices are fully flexible

34
Q

Long-run aggregate supply curve

A

Shows the aggregate price level and the quantity of aggregate output supplied that would exist if all prices, including nominal wages, were fully flexible

35
Q

LRAS is ________

A

vertical at it’s potential output

36
Q

potential output

A

The level of real GDP the economy would produce if all prices, including nominal wages, were fully flexible

37
Q

AD-AS Model

A

The aggregate supply curve and aggregate demand curve are used together to analyze economic functions

38
Q

Short-run macroecnomic equilibrium

A

When quantity of aggregate output supplied is equal to quantiy demanded

39
Q

Short run equilibrium aggregate price level

A

The aggregate price level in the short-run macroeconomic equilibrum

price level at Esr, Pe

40
Q

Short-run equilibrium aggregate output

A

The quantity of aggregate output produced in the short-run macroeconomic equilibrium

Esr, Ye

41
Q

Pe

A

Short run equilibrium aggregate price level

42
Q

Ye

A

Short-run equilibrium level of aggregate output

43
Q

Demand shock

A

An event that shifts the aggregate demand curve

44
Q

stagflation

A

The combination of inflation and falling aggregate output

45
Q

Long-run macroeconomic equilibrium

A

When the point of short-run macroeconomic equilibrium is on the long-run aggregate supply curve

46
Q

Recessionary gap

A

When aggregate output is below potential output

47
Q

In the end, the economy is ____________ in the long run

A

self-correcting

48
Q

inflationary gap

A

When aggregate output is above potential output

49
Q

Output gap

A

The percentage difference between actual aggregate output and potential output

Actual aggregate output - potential output

               potential output            X100

*Tends to go towards zero

50
Q

Economy is self correcting

A

When shocks to aggregate demand affect aggregate output in the short run, but not the long run

51
Q

Stabilization policy

A

The use of government policy to reduce the severity of recessions and rein in excessively strong expansions

52
Q
A

Macroeconomics (26 decks)

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