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Econ 114 > 4.1-4.4 > Flashcards

4.1-4.4 Flashcards

1
Q

depends on the production function of a country

A

aggregated output or supply (GDP)

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2
Q

taken together, capital, labour, natural resources constitute a Nation’s-State’s

A

factor endowment

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3
Q

what are the 3 forms of labour

A
  1. productive
  2. managerial
  3. entrepreneurial
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4
Q

productive, managerial, and entrepreneurial are embody

A

personal knowledge

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5
Q

a governing body of an organization regarded collectively

A

management

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6
Q

the role of management is to make _____ available so that production workers can works tasks and markets can distribute ______

A

inputs

outputs

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7
Q

most major corporations follow a

A

hired gun or business entrepreneur

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8
Q

entrepreneur comes from the french words

A

entre, prendre

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9
Q

involves seeing and realization a vision of future markets, products and opportunities and leads the organization in realizing that vision

A

entrepreneurial knowledge

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10
Q

is constantly evolving

A

natural resources

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11
Q

at first glance has no relationship to knowledge, but new knowledge lets us see it in a different light

A

natural resources

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12
Q

refers to the impact of new knowledge on the production function of a firm/nation

A

technological change

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13
Q

known as the measure of our economic ignorance

A

Solow Residual

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14
Q

symbolic equation for production function

A

Y=f(K,L,T)

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15
Q

what percentage of growth in national income us attributable to changes in quantity and quality of K and L, and what % is attributable to technological change

A

25%

75%

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16
Q

the economic effect of solow residual was called

A

creative destruction

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17
Q

in response to technological change, the production can shift up or down because

A

technology can be found or lost

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18
Q

a new production function can emerge with

A

innovation and/or elimination

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19
Q

2 supply surves

A
  1. short-run aggregate supply (SAS)

2. long-run or potential aggregate supply (LAS)

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20
Q

aggregate expenditure, demand and the SAS abd LAS results in the

A

Keynesian double cross

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21
Q

is the 45 degree line

A

Keynesian cross

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22
Q

equilibrium is with respect to both

A
  1. current (short run) equilibrium

2. potential (long run) equilibrium

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23
Q

SAS is plotted assuming ______ remain constant

A

nominal factor prices

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24
Q

if the overall price level rises in the SAS then what happens to real factor prices and production?

A
  1. decline

2. increase

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25
Q

why does an increase in price level result in increased production

A

because revenue goes up while costs remain the same (profit increase)

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26
Q

why is the SAS upward sloping

A

because as production grows prices rise

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27
Q

higher prices for g/s with lower real factor cost in production _______ profits and encourages firms to _______

A

increases

supply more

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28
Q

shifts in the SAs can occur due to (2)

A
  1. change in any factor costs

2. technological change

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29
Q

SAS is the summation of supply curves all producing _______ in an economy and react the same to _______

A
  • enterprise

- changes in final and factor prices

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30
Q

in the classical model it is assumed money wages and prices are

A

perfectly felxible

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31
Q

when money wages and prices are perfectly flexible an increase in demand

A

raises prices rather than expand output

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32
Q

SAS is

A

inelastic or even vertical

33
Q

Keynes believed that money wage was not

A

perfectly flexible but sticky

34
Q

exhibits forward looking expectations

A

business

35
Q

under the Keynesian model sticky wages results in a SAS curve with a

A

relatively gentle upward slope

36
Q

in the classical and new classical model, flexible wages and prices result in a very _________ SAS curve

A

inelastic or even vertical

37
Q

the difference in the slope of the SAS curve has significant implication for

A

fiscal and monetary policy

38
Q

is found when all available factors of production are fully employed

A

long-run aggregate supply curve

39
Q

LAS is vertical, so there can be no _______ since factors of production are fully employed

A

increase in output

40
Q

LAS corresponds to

A

potential real GDP

41
Q

LAS corresponds to potential real GDP , that is the

A

max output attainable given the existing supply of factors of production

42
Q

movement up or down the LAS curve is caused by a change in (2)

A
  1. aggregate price level for final g/s

2. factor prices

43
Q

if final prices go up what happens to factor prices

A

rise at the same rate

44
Q

if final prices go up, meaning factor prices rise at same right means that these 3 things remain constant

A
  1. real wage rate
  2. other factor prices
  3. real GDP
45
Q

LAS shifts right or left if there is an increase or decrease in

A

available factors of production

46
Q

the key for movement along SAS is the

A

labour market

47
Q

movement up along the SAS curve means real GDP ____ as price level ____ because unemployment _____ as real wage rate ______ with nominal or money wages ______

A 
rises
rises
falls
falls
fixed
48
Q

the natural rate of Ue is

A

full employment

49
Q

how is the natural rate of Ue (full employment) achieved

A

when SAS measured by real GDP attains LAS

50
Q

the natural rate of Ue does not equal 0 but rather reflects

A

frictional and structural Ue

51
Q

if one moves along SAS beyond LAS (potential GDP), factor prices

A

will increase

52
Q

while in short run, output may exceed potential but cannot be maintained because

A

competition for fully employed factors of production raises their cost causing production to drop, shifting SAS to the left

53
Q

shifts in SAS occurs because of _____, affecting a _____

A
  • changes in real factor prices

- firm’s costs of production

54
Q

LAS does no shift because with changing factor prices because

A

factors and inputs are fully employed

55
Q

shifts in both SAS and LAS are caused by

A
  1. changes in quantity of K and L

2. advances in technology

56
Q

purpose of the AD/AS model is to

A

understand and predict changes in real GDP and price level

57
Q

there are both short-run and long-run points of

A

equilibrium

58
Q

short-run equilibrium occurs when

A

SAD=SAS

59
Q

if final and factor prices tend to be higher than consumers are willing to pay the firms will

A

cut production, lower prices, and factor prices will tend to fall

60
Q

to bring SR back to equilibrium when real GDP is higher than equilibrium firms will

A

cut production, lower prices, and factor prices will tend to fall

61
Q

if real GDP is is less than equilibrium, prices will

A

increase until equilibrium is achieved

62
Q

if SR equilibrium is less than potential real GDP or full employment there is a

A

recessionary gap

63
Q

if SR equilibrium is more than potential real GDP or full employment there is an

A

inflationary gap

64
Q

in a recession factor prices are depressed causing cost of production to ____ and output to _____

A

fall

increase

65
Q

during inflation factor prices are ____ causing the cost of production to _____ and output to _____

A

elevated
rise
fall

66
Q

shifts in _____ are measured by the growth rate of potential GDP

A

LAS

67
Q

results when the rate of growth of aggregate demand is greater than long-run aggregate demand

A

inflation

68
Q

a major factor affecting the rate of growth of AD is the

A

quantity of money

69
Q

if the money supply grows faster then LAS what occurs

A

inflation

70
Q

if the money supply grows slowly, inflation

A

grows slowly

71
Q

if world economy grows faster than the domestic economy, demand for exports

A

increases

72
Q

if the world economy grows faster than the domestic economy this shifts the domestic economy

A

out of equilibrium with LAS

73
Q

If SAS curve shifts to the left out of equilibrium with potential GDP, what is created

A

a recessionary gap but at a higher price level

74
Q

a recessionary gap but at a higher price level is a combination of

A

recession and inflation

75
Q

the combination of recession and inflation is called

A

stagflation

76
Q

the economy can be in 3 possible states

A
  1. recessionary gap
  2. full employment
  3. inflationary gap
77
Q

will tend to eliminate inflationary gap and restore full employment

A

automatic forces

78
Q

there are no automatic forces that will eliminate a

A

recessionary gap

Econ 114 (7 decks)

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