Test 2 Flashcards
1
Q
Sticky wages define
A
Some prices like wages cannot adjust right away when the conditions in the economy change. This means self adjustment won’t work
2
Q
MPC
A
Marginal propensity income
When I’m given an extra dollar how much will I consume
3
Q
The multiplier
A
Measures increase in AD when an additional dollar is given to the economy
4
Q
How to calculate multiplies when given MPC
A
1- mpc
5
Q
Crowding out effect
A
Reduction in private spending g and investment as a result of higher interest rates from the government
6
Q
Supply side economics
A
Changes in the tax rate can affect AS
