AP Econ Macro Chapter 3 Flashcards
What is this?
Aggreagate Demand and Aggregate Supply model
How does more “Consumer Spending” effect the AD curve?
C up, AD up
How does more “Fiscal Assests” effect the AD curve?
AD up
How does more “Household Debt” effect the AD curve?
AD down
How do higher “Interest Rates” effect the AD curve?
AD down
Expected Returns (all go up)
a) Expected Income
b) Technology
c) Excess Capacity
d) Taxes
a) AD up
b) AD up
c) AD down
d) AD down
How does more “Government Spending” effect the AD curve?
AD up
How do more “Net Exports” effect the AD curve?
AD up
How does more “X” effect the AD curve?
AD up
How does more “M” effect the AD curve?
AD down
What is the “Investment Multiplier Equation”
What is the “Tax Multiplier” equation
What is and what do they affect…
S: up
T: up
R: up
I: up
P: up
This means…
Subsities: AS up
Taxes on businesses: AS down
Regulation: AS down
Input Costs: AS down
Productivity: AS up
What is the equation for “GDP”?
C + I + G + X - M
C: Consumer spending
**I: **Investments
G: overnment Spending
X: Exports minus inports
M: Imports
What is “APC” and the equation for “APC”?
Average propensity to consume (APC) = Total Consumption/Total Disposable Income
What is “MPS” and the equation for “MPS”?
Marginal Propensity to Save (MPS) = ∆S / ∆DI
What is “MPC” and the equation for “MPC”?
Marginal Propensity to Consume (MPC)= ∆C / ∆DI
What is “The Wealth Effect”?
The change in consumer sspending caused by the altered purchasing power of consumers’ assets.
Aggregate Price Level increases
Do to “The Wealth Effect” C falls when aggregate PL rises leading to a downward shift of AD
What is “The Interest Effect”?
A rise in aggregate PL depressing investment spending and and consumer spending.
Leads to a downward shift in AD
Why is the AD curve downward sloping?
Three explanations for the negative slope are:
- Interest rate effect
- Real balance effect
- Foreign purchases effect
Aggregate demand (AD) is a curve showing the total amount of goods and services (real GDP) that will be purchased at different price levels.
What does Cost-Push Inflation do?
PL up
Unemployment up
GDP down
What does Demand-Pull inflation do?
PL up
Output up
AD up
Unemployment down
What does Stagflation do?
Persistent high inflation combined with high unemployment and stagnant demand in a country’s economy.
Why is the SRAS curve downward sloping?
