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Subjects > ECONOMICS-AD&AS > Flashcards

ECONOMICS-AD&AS Flashcards

1
Q

Why is AD downward sloping?

A
  1. wealth effect
  2. interest rate effect
  3. international trade effect/ exchange rate effect
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2
Q

Wealth effect

A

A rise in price level reduces the purchasing power

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3
Q

Interest rate effect

A

A rise in price level increases demand for money, hence the price of money increases

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4
Q

Exchange rate effect

A

Demand for export falls

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5
Q

Factors increasing consumption

A
  1. disposable income
  2. money supply
  3. interest rate
  4. wealth
  5. population size
  6. confidence
  7. preference from saving to consumption
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6
Q

Factors increasing investment

A
  1. interest rate
  2. corporation tax
  3. 收益率 rate of return
  4. business confidence
  5. advances in technology
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7
Q

Factors increasing net export

A
  1. an exchange rate depreciation
  2. a lower interest rate
  3. increase in international competitiveness of country’s goods and services
  4. a fall in imports dueto trade protectionism
  5. increase in foreign incomes
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8
Q

Why is SRAS upward sloping

A
  1. the profit effect
  2. sticky-price theory
  3. the misinterpretation effect (misperception)
  4. the cost effect 了解即可
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9
Q

The profit effect (sticky wage)

A

Production more profitable, more production

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10
Q

Sticky price theory

A

A rise in price level leaves some firms with lower prices, promoting sales. (低价不变，sales上升)

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11
Q

The misinterpretation effect (Misperception)

A

Consider ‘higher prices’ = ‘popular’

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12
Q

Why SRAS decrease

A
  1. A price rise of factors of production
  2. Increase in cost of imported raw materials
  3. Tax increase on firms
  4. Reduction in quantity of resources
  5. Decrease in productivity/ quality of resources
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13
Q

Yn of LRAS is

A

The potential output/ employment output/ natural rate of unemployment output

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14
Q

Yn is determined by

A
  1. quantity of resources
  2. quality of resources
    👉any event that changes either quantity or quality of resources will shift LRAS
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15
Q

Factors (quality) determining LRAS shift

A
  1. improved education and training

2. advances in technology

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16
Q

Factors (quantity) determining LRAS shift

A
  1. net immigration
  2. increase in the retirement age
  3. more women entering the labor force
  4. net investment
  5. discovery of new resources
  6. land reclamation
17
Q

Effects on SRAS of increase in AD

EXPANSION

A

SHIFT LEFT

  1. producing beyond normal output, excess demand for labors
  2. nominal wages up
18
Q

Effects on SRAS of decrease in AD

RECESSION

A

SHIFT RIGHT

  1. excess supply of labor, nominal wage decreases, supply increases
  2. back at full employment level of output
19
Q

Effects on SRAS of an increase in cost

SUPPLY SHOCK

A

STAGFLATION - output decreases and price level goes up
👉SHIFT LEFT
👉in the long run, low wage = low cost, back to normal

Subjects (12 decks)

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