Chapter 14 Flashcards
What is aggregate demand curve
shows quantity of goods and services they want to buy
Why is AD downward sloping?
- wealth effect 2. interest rate effect 3. real exchange rate effect
Why does AD shift?
change in consumption, investment, gov purchase, net exports
What is aggregate supply curve
quantity of g and s they chose to produce
Why does AS slope up?
increase in price level raises q and s supplied
Why does AS shift?
change in labour, capital, natural resources, tech knowledge
interest rate effect
changes in interest rates impact borrowing, spending, and investment in an economy.
wealth effect
higher wealth encouraging spending and lower wealth leading to reduced spending
real exchange rate effect
changes in the relative prices of goods and services between two countries impact international trade
sticky wage and price
doesn’t change right away in response to the economy
misperceptions theory
fluctuations come from people misjudging purchasing power
stagflation
combo of recession and inflation
