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AP Econ > Chapters 26,36,37 > Flashcards

Chapters 26,36,37 Flashcards

0
Q

Growth promoting structures

A

Strong property rights, patents and copyright, efficient financial institutions, literacy and education, free trade, competitive market system

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1
Q

Economic Growth

A
  • an increase in GDP over some amount of time

- an increase in GDP per capita over some amount of time

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2
Q

Determinants of growth

A
  • increase in quantity or quality of natural resources
  • increase in the quantity or quality of human resources
  • increase in the supply or stock of capital goods
  • improvements in technology
  • (demand factor)
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3
Q

Long run AS represents

A

full employment

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4
Q

Classical View

A

Government does not need to get involved because the economy will fix itself
Vertical AS

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5
Q

Keynesianism

A

-Prices and wages are sticky so the price level will not fall if output is below full employment
-Horizontal AS
(mainstream model)

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6
Q

Two views of macroeconomics

A

Mainstream macro and new classical economics

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7
Q

Mainstream Macroeconomics view of the private economy

A

The private economy is potentially unstable because investment plans are unequal to saving plans (AS shocks)

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8
Q

Mainstream Macro on price and wage stickiness in the short run

A

Immediate short run: prices and wages are sticky

Short run: wages are sticky prices are inflexible downward but flexible upward

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9
Q

Mainstream Macro on appropriate macro policies

A

active fiscal and monetary policy

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10
Q

How does a change in the money supply effect the economy acording to mainstream economics?

A

By changing the interest rate, which changes investment and real gdp

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11
Q

Mainstream economics on velocity of money

A

Unstable

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12
Q

Mainstream Macro on how fiscal policy affects the economy

A

Changes AD and GDP via the multiplier process

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13
Q

Mainstream macro on cost-push inflation

A

Possible

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14
Q

New classical economics types

A

Monetarism and rational expectations

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15
Q

Monetarism and rational expectations view of the private economy

A

stable in the long run at natural rate of unemployment

16
Q

Monetarism: cause of the observes instability of the private economy

A

inappropriate monetary policy

17
Q

Monetarism: short run price and wage stickiness

A

Prices flexible upward and downward in the short run, wages are sticky in the short run

18
Q

Monetarism and rational expectations: appropriate macro policies

A

Monetary rule

19
Q

Monetarism on how changes in the money supply affect the economy

A

By directly changing AD, which then changes GDP

20
Q

Monetarism view on the velocity of money

A

Stable

21
Q

Monetarism view on how fiscal policy affects the economy

A

No effect unless money supply changes

22
Q

Monetarism and rational expectations view of cost push inflation

A

Impossible in the long run in the absence of excessive money supply growth

23
Q

Rational expectations: cause of the the instability of the private economy

A

Unanticipated AD and AS shocks in the short run

24
Q

Rational expectations: short run price stickiness

A

Prices and wages flexible both upward and downward in the short run

25
Q

Rational expectations on how changes in the money supply affect the economy

A

No effect on the output because price level changes are anticipated

26
Q

Rational expectations view of the velocity of money

A

No consensus

27
Q

Rational expectations on how fiscal policy affects the economy

A

No effect because price level changes are anticipated

28
Q

Mainstream view

A

Economic instability comes from price stickiness and unexpected shocks to AD or AS
-focuses on aggregate spending and its components (c+i+x+g=gdp)

29
Q

Monetarism view

A

1) focuses on money supply
2) holds that markets are highly competitive
3) says that a competitive market system gives the economy a high degree of macroeconomic stability

30
Q

Rational expectations theory

A

The idea that households and people will anticipate fiscal and monetary policies and by acting in their own self interest will make these policies ineffective

31
Q

Equation of exchange

A

MV=PQ

32
Q

Laffer Curve

A

Percent tax rate and tax revenue, curve is horizontal and at 0 tax revenue when tax rate is 0 and 100

33
Q

Fiscal Policy

A

The government changes government spending or tax policies (which change consumption) by laws (discretionary)

Aims to shift aggregate demand to fix problems

34
Q

Monetary policy

A

The fed controls the money supply and either changes the reserve requirement, discount rate, or open market operations to change the interest rate in order to change investment

35
Q

Expansionary monetary policy

A

Government buys bonds—the bank reserves increase—banks loan more money(increase in the money supply)—interest rate goes down—investment goes up—AD goes up

AP Econ (15 decks)

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