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Flashcards in ECON CH 13 Deck (30):
1

Aggregate demand

the total demand for goods and services in the economy

2

AD curve

a curve that shows the negative relationship between aggregate output (income) and overall price level

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AD shifters

1. gov spending
2. net taxes
3. MS

4

shifts AD curve to right

an expansionary monetary policy (increase in MS) does what to the AD curve

5

shifts AD curve to the right

an expansionary fiscal policy (increase in G or decrease in G) shifts the AD where

6

AD up

exp: G up, T down, MS up

7

AD down

cont: G down, T up, MS down

8

aggregate supply

the total supply of all goods and services in the economy

9

AS curve

a graph that shows the relationship between aggregate quantity of output supplied by all firms (Y) in an economy and the overall price level

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positive slope

in the SR the AS curve has what type of slope

11

fairly flat

at low levels of aggregate output (recession) the AS curve is what

12

vertical

in the LR, at potential (full employment), the AS curve is what

13

only by raising prices (not output)

as the economy approaches max capacity, firms respond to further increases in demand by doing what to prices

14

1. a cost shock (or supply shock) is a change in costs that shifts the AS curve
2. factors that affects the economic growth of the economy
3. economic policies (supply-sided, deregulations)

shifts in SR-AS curve can be caused by 3 things

15

cost shock or supply shock

a change in costs that shifts the SR-AS curve

16

equilibrium price level

is the point at which AD and AS curves intersect

17

LR-AS

a vertical line that shows the potential (natural) level of output (GDP) the economy can produce without inflation

18

by higher AD

for short periods of time, output can be pushed above potential level by what

19

expansion

above LR

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recession

below LR

21

1. changes in the economy (cost shocks)
2.effects of fiscal policy
3. effects of monetary policy
4. effects of international trade policies

the AS/AD framework (model) can be used to analyze (4)

22

AD shift to right

expansionary policy: an increase in MS, tax cuts, or an increase in gov spending does what to AD curve

23

when AS curve is vertical

neither monetary policy nor fiscal policy has any effect on output when AS curve is what

24

inflation

an increase in the overall price level

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sustained inflation

occurs when the overall price level continues to rise over a fairly long period of time

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1. demand pull inflation
2. cost push inflation
3. inflation triggered by expectations
4. inflation as monetary phenomenon

4 causes of inflation

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demand pull inflation

inflation initiated by an increase in aggregate demand

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cost push or supply side, inflation

inflation caused by an increase in production costs

29

hyperinflation

a period of very rapid increases in the price level

30

shifts the AS curve to the left

sn increase in inflationary expectations shifts the AS curve where