Econ: Macro: unit 3 Flashcards
aggregate output
real GDP up, output up, employment up, unemployment down
aggregate spending
C+G+I+Xn
aggregate income
wage+rent+interest+profit
What is Y
symbol for income
if PL goes up
inflation goes up
If PL goes down
inflation goes down
aggregate demand
add up all together | all the goods/services (real GDP) that buyers are willing and able to purchase at different price levels
if PL goes up (inflation), the real GDP (output) demanded?
falls
if PL goes down (deflation), the real GDP (output) demanded?
increases
What shifts AD and who is the demand of AD by?
C+I+G+Xn (consumers, investors, government, exports, imports) (consumers, businesses, governments, foreign countries)
what does not shift the curve
Price level
change in price level does what?
movement along the curve (NO SHIFT)
high price levels do what to purchasing power of money?
reduce
if PL goes up what happens to AD
goes down bc ppl wanna buy less
high interest rates do what
discourage consumer spending and business investment
Interest rate effect
PL goes up, ppl need more money for purchases, lenders need to charge higher interest rate to get a real return on their loans, which causes a change in goods/services with borrowed money (interest rate goes up, you are less likely to take our loans to improve your business)
foreign trade effect
US PL goes up, foreigners purchase fewer US goods and americans buy more foreign goods (Xn goes down)
an increase in CIGXn shifts AD where?
right
changes in consumer spending
wealth, income, consumer expectations, income taxes,
changes in investment spending
real interest rate, future business expectations, change in business inventories
recessionary gap, where is LRAS
to the right
inflationary gap, where is LRAS
to the left
long run equilibrium, where is LRAS
middle
what shifts AS
RAP (changes in resource prices, actions of government, and productivity)
positive shock in AD
inflation up, employment up
negative shock in AD
inflation down, employment down
positive shock in AS
inflation down, employment up
negative shock in AS
inflation up, employment down (NEVER WANT TO BE IN THIS)
stagflation
stagnant economy and inflation
demand pull
AD up, prices up, consumers want goods/services
cost push
SRAS down, higher production costs increase prices
causes of inflation
demand pull, cost push
SRAS is upward sloping since wages and resources prices are what? what relationship is SRAS direct with?
sticky and direct relationship between PL and RGDP
LRAS wages and resources are what
flexible, no relationship between PL and
RGDP
