Chapter 5 Flashcards

Aggregate demand and supply,

1
Q

What is supply in the Keynesian curve? (long run or short run, horizontal of vertical, what defines firms supply?)

A
  1. Short run
  2. Horizontal
  3. Firms will supply whatever amount at the given price level
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is supply in the Keynesian curve? (long run or short run, horizontal of vertical, what defines firms supply, full employment?)

A
  1. Long run
  2. Vertical
  3. The same amount of a good will be supplied regardless of the price
  4. Labour is fully employed so output is at its potential level
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What three types of unemployment contribute to the natural unemployment rate?

A
  1. Frictional
  2. Structural
  3. Real wage unemployment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the approximate rate of natural unemployment in Canada?

A

5.5-6.5%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What do expansionary policies do to aggregate demand?

A

shift the demand curve to the right

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the real money supply?

A

value of money provided by the central bank and the banking system

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the velocity of money

A

The number of times it turns over in a year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What happens to price level if output is above its potential?

A

it increases and is higher next period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What happens to price level if output is below its potential?

A

price falls, and is lower next period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What controls the speed of the the price adjustment system? When does the mechanism work quickly?

A

Controlled by ƛ, the larger the ƛ the faster the economy returns to potential output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

In the Keynesian model, what does a shift to the right of AD do?

A

increases output but leaves the equilibrium price level unchanged

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

In the Classical model, what does a shift to the right of AD do?

A

increases the equilibrium price level but leaves output unchanged

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What are three thing supply side policies can be used to do?

A
  1. removing unnecessary regulation
  2. Maintaining an efficient legal system
  3. Encouraging technological progress
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What can only supply side policy do?

A

permanently increase output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Over long period what is the sole determinant of output?

A

aggregate supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is considered low and high for annual output growth?

A

2%, 4%

17
Q

What is a key determinant of aggregate supply over long periods?

A

money supply