graphs Flashcards
What does a shift in the AD and LRAS curve impact?
growth, unemployment, inflation and trade
what does the natural rate of unemployment link to?
structural, fictional and seasonal
impact of policies to the natural rate of unemployment
Shifts the SAC (people who take jobs) to the right towards the SLF (people willing to work)
Free Trade link to?
benefits of trade (allocative efficiency)
does free trade link to protectionism?
Yes- quantity declines= lower revenue, profits and domestic unemployment
what does Tariffs link to?
reasons for protectionism
Examples of protectionism?
infant industry, against dumping, unemployment, reducing trade deficit
reasons for protectionism
higher prices, lower consumer surplus, lower quantity, lower choice and impact on living standard
Laffer curve
used to evaluate macro policy (fiscal policy)
what does an increase in the tax rate lead to?
decreased revenue
Crowding out effect
Government borrowing raises interest rates, dampening private spending and investment.
what are the effects of the crowding out effect
The crowding-out effect can lead to reduced private sector spending, decreased investment, and potentially slower economic growth.
liquidity trap
When interest rates are very low, but people hoard cash instead of spending or investing, making usual economic stimulus methods ineffective.
what happens to expansionary monetary policy when in a liquidity trap
is made useless in a liquidity trap, looses its effectiveness
