econ 3 Flashcards
why AD slopes down
real balances/wealth effect
increase price, less value in money leads to less spending and less production/GDP
why AD slopes down
interest rate effect
increase prices, ppl don’t save alot, banks have less money to lend n charge higher interest on loans, business spends less
Quantities theory of money
Increase in money supply leads to increase in price level
why AD slopes down
foreign purchases (net export) effect
increase prices, foreign buy less of our exports, decreases GDP
why AD curve shift
changes in cigx
balance budget multiplier
expansionary: gov increase spending. speeds up econ
contractionary: increase taxes slows econ down
spending-taxing
long run as
changes productivity
population
technolgy
philips curve
shift in AD moves along SR
shift in AS, shift SR
unemployment vs inflation
automatic fiscal policy
programs already in place so recessions are not intense
unemplyment benefits, wellcare, progressive income tax
discretionary fiscal policy
new law needs to be made to fix depression/inflation. tax n gov spending
recession: reduce taxesn increase govspening
inflation: increase taxes-hard to do
inside lag
long
recognize problem to the time that a fiscal policy becomes law n is enacted
outside lag
short
from the time the policy of enacted to the time it impacts the econ
mpc
percentage of income that someone spends
MPS
percentage of income that they save
MPS+MPC
=1
