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econ 2120 > Chapter 13: The Aggregate Demand - Aggregate Supply Model > Flashcards

Chapter 13: The Aggregate Demand - Aggregate Supply Model Flashcards

1
Q

Two paths of study in macroeconomics:

A

(1) Long-run growth and development

(2) Short-run fluctuations, or business cycles

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2
Q

Focuses on theories that affect economies over several decades

A

Long Run Growth and Development

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3
Q

Focuses on time horizons of five years or less

A

Short Run Growth Fluctuations or Business Cycles

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4
Q

GDP during expansions:

A

Positive

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5
Q

GDP during recessions:

A

Negative

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6
Q

Unemployment in expansions:

A

Falls

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7
Q

Unemployment in recessions:

A

Rises

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8
Q

The total demand for final goods and services in an economy

A

Aggregate Demand

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9
Q

Three Reasons Why Quantity of AD and Price Level are Negative:

A

(1) The Wealth Effect
(2) The Interest Rate Effect
(3) The International Trade Effect

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10
Q

The change in quantity of aggregate demand that results from wealth changes due to price level changes.

A

Wealth Effect

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11
Q

Occurs when a change in the price level leads to a change in interest rates and therefore in quantity of aggregate demand.

A

Interest Rate Effect

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12
Q

The net value of one’s accumulated assets

A

Wealth

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13
Q

The interest rates effect occurs through the _____________.

A

Loanable Funds Market

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14
Q

Occurs when a change in the price level leads to a change in the quantity of net exports demanded

A

International Trade Effect

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15
Q

Shift Factors in Aggregate Demand:

A

(1) Consumption
(2) Investment
(3) Government Spending
(4) Net Exports

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16
Q

Consumption is influenced by:

A

(1) Changes in real wealth
(2) General Expectations about the future
(3) Changes in taxes

17
Q

Investment is influenced by:

A

(1) Investor Confidence
(2) Interest Rates
(3) Quantity of Money in the Economy

18
Q

Government spending is influenced by:

A

Policymakers

19
Q

Net Exports influenced by:

A

Shifts in response to changes in foreign income and the exchange value of the U.S. dollar

20
Q

Movements along the aggregate demand curve are caused by ________.

A

Change in the price level

21
Q

T or F: Shifts in the aggregate demand curve occur when something other than the price level changes.

A

True

22
Q

Aggregate Supply changes are measured in:

A

(1) Short term

(2) Long term

23
Q

A time period sufficient enough for all prices to adjust

A

Long term

24
Q

u*

A

The level of output produced when an economy is at the natural rate of unemployment

25
Q

What shifts the long run aggregate supply curve?

A

(1) Resources
(2) Technology
(3) Institutions

26
Q

The period of time in which some prices have not yet adjusted

A

Short Run

27
Q

Three reasons why there is a positive relationship between the price level and the quantity of aggregate supply:

A

(1) Sticky Input Prices
(2) Menu Costs
(3) Money Illusions

28
Q

The cost of changing prices

A

Menu Costs

29
Q

Occurs when people interpret nominal changes in wages or prices as real changes. As discussed, this is false.

A

Money Illusion

30
Q

T or F: Whenever the long run aggregate supply curve shifts, it takes the short run aggregate supply curve with it.

A

True

31
Q

Factors that shift only the short run aggregate supply curve:

A

(1) Changes in resource prices
(2) Changes in expectations of prices
(3) Supply Shocks

32
Q

Surprise events that change a firm’s production costs

A

Supply Shock

33
Q

Reached when the quantity of aggregate demand is equal to the quantity of aggregate supply in the short and long run.

A

Long Run Equilibrium

34
Q

LRAS = SRAS = AD

A

Long Run Equilibirum

35
Q

Economy is at full employment and the unemployment rate is equal to the natural rate.

A

Long Run Equilibrium

econ 2120 (8 decks)

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