B321 Macro Econs Flashcards
What does Aggregate Demand (AD) measure?
The demand for all goods and services at different price levels
It shows the relationship between the general price level and the quantity demanded of real GDP.
What is the formula for Aggregate Demand (AD)?
AD = C + I + G + (X - M)
Where C is consumption, I is investment, G is government expenditure, X is exports, and M is imports.
What are the components of Aggregate Demand (AD)?
- C: Consumption expenditure
- I: Domestic investment expenditure
- G: Government expenditure
- X: Exports
- M: Imports
What happens to the quantity demanded for goods and services when the general price level falls?
It increases, resulting in a movement along the AD curve.
What causes the AD curve to shift right?
An increase in consumption, investment, government expenditure, or net exports.
What causes the AD curve to shift left?
A decrease in consumption, investment, government expenditure, or net exports.
What is Aggregate Supply (AS)?
The total amount of goods and services produced by all industries in the economy at any given price level.
What are the two time frames associated with Aggregate Supply?
- Short-run aggregate supply (SRAS)
- Long-run aggregate supply (LRAS)
Why does the SRAS curve slope upward?
A rise in price level causes an increase in the quantity of real GDP supplied.
What are some factors that can shift the SRAS curve?
- Changes in wages
- Oil prices
- Cost of raw materials
- Government indirect taxes and subsidies
What happens to the SRAS curve with adverse supply shocks?
It shifts to the left, causing the price level for a given amount of output to rise.
What causes the SRAS curve to shift right?
Positive supply shocks, such as decreases in oil prices.
What is the short-run macroeconomic equilibrium?
Where Aggregate Demand (AD) equals Short-run Aggregate Supply (SRAS).
In the short-run, what does an increase in AD cause?
- Real GDP to increase
- General price level to increase
What is the characteristic of Long-run Aggregate Supply (LRAS)?
It is vertical because all prices adjust in the long-run.
What does LRAS depend on?
- Capital
- Labour
- State of technology
What happens in the long-run when AD increases?
There is no impact on real GDP; the economy continues to operate at potential GDP.
What factors can shift the LRAS curve to the right?
- Increase in resource quantity
- Rise in productive capacity
- Increase in resource quality
- Rise in productivity
What factors can shift the LRAS curve to the left?
- Decrease in resource quantity
- Fall in productive capacity
- Decrease in resource quality
- Fall in productivity
What does LRAS stand for?
Long-Run Aggregate Supply
LRAS represents the total supply of goods and services in an economy at full employment.
What is the effect of an increase in resource quantity on productive capacity?
Rise in productive capacity
An increase in the quantity of resources leads to a potential increase in the economy’s output.
Fill in the blank: A decrease in resource quality leads to a ______ in productivity.
Fall
Decreased quality of resources results in less efficient production.
What are the factors of production that can shift LRAS?
- Increase in Quantity
- Improvement in Quality
Changes in factors of production can lead to shifts in the Long-Run Aggregate Supply curve.
What does an increase in Equilibrium Real GDP indicate when the economy is at full employment?
Higher price level (inflation) without an increase in real GDP
This occurs when aggregate demand increases without a corresponding increase in output.
True or False: Technological advancements can increase access to resources.
True
Innovations can lead to improved resource discovery and utilization.
What are some examples of factors that can increase the labor force?
- Increase in birth rate
- Immigration
- Education and training
These factors contribute to a larger, more skilled workforce.
What impact does increased government spending have on Aggregate Demand (AD)?
Rise in AD
Government expenditures can stimulate economic activity by increasing demand.
What is the expected outcome of the lifting of COVID-19 border measures on tourism in Singapore?
Tourism receipts expected to climb to $21 billion
The recovery of tourism is crucial for economic growth, especially in sectors reliant on foreign visitors.
What is the role of the National Productivity Fund?
Provides grants for companies to invest in productivity and training
This fund supports businesses in enhancing their capabilities and workforce skills.
What does an increase in investment (I) typically indicate for an economy?
Growth in manufacturing and job creation
Increased investment often leads to higher production capacity and employment opportunities.
What are the components that shift the Aggregate Demand curve?
- Consumption (C)
- Investment (I)
- Government spending (G)
- Net exports (X-M)
Changes in these components can lead to shifts in the AD curve.
Fill in the blank: A rise in exports (X) contributes to an increase in ______.
Aggregate Demand
Increased export levels reflect higher demand for domestic goods from foreign markets.
What is one consequence of a rise in general price levels?
Potential inflation
An increase in price levels can erode purchasing power and affect economic stability.
What does SRAS stand for?
Short-Run Aggregate Supply
SRAS reflects the total production of goods and services in the short run when prices are sticky.
What is the expected impact of digital and automation solutions on labor productivity?
Increase in productivity
Implementing advanced technologies can lead to more efficient production processes.
What is the relationship between AD and SRAS shifts?
Both can shift rightward due to increased economic activity
A rise in aggregate demand can lead to increased short-run aggregate supply as firms respond to higher demand.
What is one of the main goals of the RIE2025 strategy?
Strengthening research and development
This strategy aims to boost innovation and economic growth through increased R&D investment.
