Macroecon chapter 9 Flashcards
Potential GDP is equal to…
Long-Run AS
What kind of curve is LRAS
Vertical curve
What happens when AD intersect AS at the left of Yp
Recession gap
What happens when AD intersect AS at the right of Yp
Inflationary gap
Wage rate relation with U rate on Philip Curve
Negative
Inflation rate relation with U rate on Philip Curve
Negative
Potential GDP Yp is a function of… (4)
- Tech
- Human Capita
- Labour force
- Natural resources
Expansionary fiscal polity (t and G)
- Δt < 0
- ΔG > 0
- ↑t or ↓G
Contractionary fiscal policy (t and G)
- Δt > 0
- ΔG < 0
Paradox thrift at short run (2)
- S↑ -> Y↓
- S↑ -> C↓ => AD↓ => Y↓
Paradox thrift at long run (2)
- S↑ -> Yp↑
- S↑ -> I↑ -> tech↑ -> Yp↑
Multiplier is…
An automatic stabilizer for the economy
When does transfer ↑
Recession
E, insurance cause…
C↑ => AD↑ => return at LR equilibrium
Limitation s of discretionary fiscal policy (3)
- Time lag
- Temporary vs. permanent tax change
- Fine tuning vs. gross tuning
Rounding out effect
G↓ => Yp↑ but I↓
Attractor of investor and tech↑
t↓ => Yp↑
