Ad And As Flashcards
AQS is also known as
Read GDP
Who is demand curve down sloping
Real wealth effect: lower price level will increase the value of our wealth and result in increased output
Interest rate effect :lower PL means a lower interest rate resulting in increased output
Foreign purchases effect : a lower p will make our good cheaper relative to other countries and increase output
AQD will be greater at …. Price levels
Lower
The relationship between PL and domestic output is ?
Inverse
Real wealth effect
Economy’s monetary wealth. If we buy a fixed bundle of goods every month it takes less of our money and our acquired savings buy more
Interest rate affect
Lower interest relates increase investment and consumption
Change in AD is NOT caused by? It is caused by?
Price level
C+I+XN+G
When does consumer spending shift AD curve tot he right?
Aggregate wealth increases (stocks bonds lands houses )independent of PL
Expectations of surging future inflation
Consumer indebtedness is low
Consumer taxes are decreased
Interest rates are decreased (independent of PL)
When does investment spending increase shift the a
aD curve to the right
Positive profit expectations
Factory inventories down
Business taxes reduced (also shifts AS)
When does government spending shift AD to the right
Government spending increase in military bases infrastructure health care
When does net export spending increase shift AD to the right
Foreign incomes increase (more money to buy stuff here and there) Dollar depreciates (our exports are cheaper )
What three things shift AS to the right ?
Resource cost decrease
Environment
Productivity increases
When does resource cost shift to the right
New land/supplies available Labor force increases Wages are cheaper Capital stock or entrepreneurial ability increase Imported resource cost decreases Dollar appreciates
When does environment shift AS to the right
Technological breakthrough
LRAS
Input prices (wages) are flexible and adjust to changes in price lever REAL GDP is independent of PL
