4 Flashcards
automatic stabilizers
are government programs that automatically implement counter cycle fiscal policy in response to economic conditions
suppose people are worried about losing their jobs, in the short run, this will
decrease aggregate demand and output
assume households become thriftier (cheaper). this would cause
the supply of loanable funds to increase
a technological advance leads to a shift in
both short tun and long-run aggregate supply
shifts in the short-run aggregate supply curve are caused by
supply shocks
you read in the paper that there has been a significant increase in the consumer confidence index. having taken an economics class, you predict that spending in the economy will — and aggregate demand will —.
increase, increase
an example of expansionary fiscal policy is
lowering taxes
suppose the majority of students who are graduating in May from a large university have found jobs and signed employment contracts by February. starting in Feb, these students are likely to — spending, and aggregate demand will —.
increase, increase
assume inflation is occurring in a nation, the implication(s)
is that the nominal interest rate exceed the real interest rate
when median home prices rise, the value of real wealth — and aggregate demand —.
increases, in unaffected
if large emerging economies continue to grow rapidly, we can expect US aggregate
demand to increase
the notion of the loanable funds market is the method by which
savers (typically households and individuals) supply funds to borrowers (typically firms)
during a recession consumption falls, causing the aggregate demand curve to shift to the —. in response, the government can increase government spending to shift the —.
left, aggregate demand (AD) curve to the right
during recessionary periods
outlays (spending) increase and tax revenue falls
supply shocks always cause short-run aggregate supply to
return to its original position in the long run
— is an example of an automatic stabilizer
unemployment consumption
wealth increases in the US because the value of the stock market increases, if all else is equal, this would cause
the supply of loanable funds to increase
typical fiscal policy focuses squarely on
aggregate demand
borrowers in the loanable funds market consist of
governments and firms
contractionary fiscal policy occurs when the
government decreases spending or increases taxes to slow economic expansion
aggregate demand is about — and aggregate supply is about —.
spending, production
an increase in aggregate demand is beneficial in the short run because — but not in the long run because —
the unemployment rate falls, the price level rises
when making decisions about saving and borrowing people care most about
the real rate of interest
time lags, crowding out, and saving shifts are all
issues that arise in the application of activist fiscal policy
shifts in the aggregate demand curve caused by
changes in spening
congress and the president would conduct expansionary fiscal policy in order to
try to stimulate the economy towards the expansion
an example of the multiplier effect is when
the government increases government spending initially by $100 billion, and total income in the economy increases by more than $100 billion
if people expect higher incomes in the future, then spending today — and the aggregate demand —
increases, increases
during economic expansions
outlays increase and tax revenue increases
which of the following is true about price level and aggregate supply
the price level influences aggregate supply in the short run but not in the long run
if your marginal propensity is to consume 0.75 and you get an additional $400 in income, you would spend — on consumption
$300
the interest rate is
both a return to savers and a cost to borrowers
