Macro Economics 3

Question 1

Aggregate Demand

Answer 1

Is all the goods and services (real GDP) that consumers are willing to buy at different price levels (demand of the whole economy)

Question 2

What does GDP consist of?

Answer 2

personal consumption, business investment, government spending and net exports

Question 3

Recessionary Gap

Answer 3

Actual GDP below potential GDP

Question 4

Aggregate Supply

Answer 4

Production of all firms in an economy

Question 5

Long Run Aggregate Supply

Answer 5

In the Long Run Price Level increases but GDP doesn’t

Question 6

Inflationary Gap

Answer 6

Actual GDP above potential GDP

Question 7

Stagflation

Answer 7

AS shift to the right (Stagnate Economy + Inflation)

Question 8

Phillips Curve

Answer 8

Inflation in relation to Unemployment

Question 9

Fiscal Policy

Answer 9

Government spending and taxes

Question 10

Expansionary Fiscal Policies

Answer 10

THE GAS, Laws that reduce unemployment and increase GDP, Close a recessionary gap, Increase government spending, reduces taxes

Question 11

Contractionary Fiscal Policies

Answer 11

THE BREAK, Laws that reduce Inflation and decrease GDP, close a inflationary gap, decrease government spending, increase taxes

Question 12

National Debt

Answer 12

is the accumulation of all the budget deficits over time

Question 13

Budget deficit

Answer 13

government spending exceeds its revenue