Ch 8 (Part 1) Keynesian Short-Run Model & Demand-Side Policies

Question 1

*Three curves
-_________ Demand
-Short run _________ Supply
-Long run _________ Supply

Answer 1

Aggregate

Question 2

Graphed with _____ _____ on _-axis

Answer 2

Price level, Y

Question 3

Graphed with __ on _-axis

Answer 3

GDP, X-Axis

Question 4

______ for goods and services in the entire economy
Depends upon purchases by consumers, firms, government and the rest of the world

Answer 4

Market (Goods Market)

Question 5

_________ Demand
-adding up all the demand for goods & services in an economy by all actors
-Consumers, businesses, government, rest of the world

Answer 5

Aggregate Demand

Question 6

AD = C + I + G + (X-M)

Answer 6

Aggregate Demand equation

Question 7

(Aggregate:) C
-Goods and services purchased by consumers
-largest component of GDP

Answer 7

Consumption

Question 8

(Aggregate:) I
-purchases of new capital goods by firms for new machines or factories
-also includes residential or private investment –
purchases of new homes
-both of these are for future – either future
production or future housing

Answer 8

Investment

Question 9

(Aggregate:) G
-Purchases of goods and services by the government - local, state and federal
-doesn’t include transfers – because these are not
purchases of goods and service, rather they are a transfer of income from gov to individuals – ex social security, medicare
-The first three are purchases of US goods by US
citizens, firms and government

Answer 9

Government spending

Question 10

(Aggregate:) X
-Purchases of foreign goods and services by foreigners

Answer 10

Exports

Question 11

(Aggregate:) M
-purchases of foreign goods and services by US consumers, firms, government

Answer 11

Imports

Question 12

___ _______ = (X-M)
-Exports-Imports, also called a trade balance
-If X>M, we have a trade surplus
-If X<M, we have a trade deficit

Answer 12

Net Exports