Economics & Business Cycles Flashcards
Unused production and Less investment is in the part of the business cycle called….
A Trough
If GDP is rising and unemployment is falling, what is that/
An expansion
A monetary policy is?
An increase in the money supply (expansionary)
When there is full employment and prices are stable, what will happen if there is a tax decrease?
Inflation - unless government reduces spending as well
US dollar increases, aggregate demand will….?
Decrease. when US dollar goes up this means that US products are more expensive. exports will decrease.
What does an increase in nominal wages do?
It raises the cost to produce something.
- prices go up.
- production would be less (go down)
What happens if the aggregate supply curve shifts to the right?
GDP goes up but price goes down
The line goes from the bottom inner corner of the graph
and up and outward.
Shift to the right is kind of downward.
What happens at the peak of a business cycle?
Capacity constraint and labor shortage.
Upward pressure on the price
When an economy is at full employment is there cyclical
unemployment?
No, there is no cyclical unemployment.
There is frictional, structural and seasonal unemployment.
What happens when prices go up because of cost going up?
It’s called cost/push inflation. meaning that the cost goes up. therefore supply becomes more expensive.
this pushes the price on the market even higher.
The ones that benefit the most from inflation are..
People that are in debt. because they are paying back
with inflated dollars
What should the Fed do to Decrease the money supply?
Either of these three will work:
Sell gov securities on the market
Increase the discount rate
Increase required reserve ratio
To Increase the money supply you would do the opposite.
If the average age in workforce decreases…
There will be frictional unemployment.. because younger people move between jobs more than older people.
Decreasing aggregate demand and increasing aggregate supply will have what effect on inflation
Will reduce inflationary pressures.
Prices will fall.
Boycott will cause..
Decrease demand because of the boycott.
Supply will not be affected.
Reduce overall profit , because of less sales.
No effect on revenue.
