Ch. 20 - The Full Model Flashcards
1
Q
What is the full model?
A
The framework that uses the IS curve, the MP curve, and the Phillips curve to link the interest rates, the output gap, and inflation
2
Q
Which curve does each of the 3 Macroeconomic shocks effect
A
Financial Shocks effect the MP curve
Spending Shocks effect the IS curve
Supply Shocks effect the Phillips curve
3
Q
What are the 3 steps to analyzing macroeconomic shocks?
A
- Identify the shock so you can shift a curve
- Find the output gap
- Assess inflation
4
Q
What is stagflation?
A
A combination of economic stagnation - or falling output - combined with high inflation
