Chapter 13

Question 1

What does aggregate mean?

Answer 1

a whole formed by combining several (typically disparate) elements.

Question 2

What is the aggregate demand and aggregate supply model?

Answer 2

This is a model that explains short term fluctuations in GDP and the price leve

Question 3

What is aggregate demand?

Answer 3

The total amount of G&S demanded in economy

Question 4

What does the aggregate demand curve show?

Google:

The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide.

Answer 4

The relationship of the price level and real GDP supplied in the short run.

Question 5

Draw the graph of the Aggregate Demand curve

Answer 5

Question 6

What is the aggregate supply?

Answer 6

THe total amount of supplies produced in the economy.

Question 7

What is the short-run aggregate supply curve?

Answer 7

It illustrates the relationship of price level and real GDP supplied in teh short run

Question 8

What is the graph for the Short run aggregate demand curve?

Answer 8

Question 9

Why is the aggregate demand curve downward sloping?

Answer 9

The downward slope illustrates an inverse relationship between the prce level and the real GDP. A decrease in the price level would result an increase in real GDP demanded

Question 10

What is the wealth effect?

Answer 10

This referst to the effect of change in price level on consumer expenditures.

Question 11

What is weatlh?

Answer 11

Wealth is the difference between between assets and debts.

Question 12

What happens when the price level increase?

Answer 12

The real value of House hold wealth decreases/consumer expendaiture also decreases and as such so does GDP.

Question 13

What is the interest rate affect?

Answer 13

^PL=^Interest

Question 14

What is interets?

Answer 14

The price for finanicial capital

Question 15

What is another way to define the interest rate affect?

Answer 15

The impact of a rise in the cost of borrowing on production costs due to price inflation within an economy. The interest rate effect reflects the fact that most consumers and business finance managers will cut back on their borrowing activities when interest rates increase.

Question 16

Describe the international trade effect

Answer 16

Basically what this means is if exports increase in the US for a particular product imports will decrease because it is cheaper/ better to buy the domestic products produced at home.

Vice Versa

If the imports increase in the US the exports will decrease because they are inversely related. IF it is cheaper to import a product the firm will do that instead then export them

Question 17

What are the two types of governmental policies?

Answer 17

Monetary and Fiscal

Question 18

What is a monetary government policy?

Answer 18

This type of policy refers to the federal reserve actions managing interest rates and money supplies toward achieving micro economy objectives.

Question 19

What is an example of a monetary policy?

Answer 19

A decrease in the interest rate will result things such as investment expenditures and the aggregate demanded will increase.

Question 20

Draw the graph for a monetary policy

Answer 20

Question 21

What is a fiscal policy?

Answer 21

This refers to government actiona to manage taxes and government purchase towards achieving mirco economic objective.

Question 22

What is the graph for a fiscal policy?

Answer 22

Question 23

What is changes in expectation of households and firms?

Answer 23

IF house holds are pesimistice about future income consumtion will decrease.

In the same hand

if firms are pesimistic anout future projects decrease in investments and AD

Question 24

What can cause a change in exchange rate and growth in real GDP?

Answer 24

A change in net exports

Question 25

What is change in foreign variables

Answer 25

Basically what this means is if the imports increase the exports will decrease and vice versa