Macroeconomic equilibrium and objectives Flashcards
what is macro economic equilibrium
occurs when aggregate demand equals aggregate supply
when is there equilibrium in the Keynesian model
whenever AD = LRAS
where does the long run equilibrium not have to be on the Keynesian model
at the YFE
what is the YFE
the maximum level of output an economy can produce using all of its factors of production at sustainable levels
what are the two types of equilibrium in a classical economy
short run macro equilibrium
long run macro equilibrium
when is there short run macro equilibrium
when AD = SRAS ≠ LRAS
what is it called when we are producing YFE above Y1
deflationary gap
recessionary gap
negative output gap
is the YFE used sustainably on a deflationary gap graph
yes as the YFE is above Y1
what is it called when we are producing Y1 above YFE
inflationary gap
positive output gap
is the YFE used sustainably on an inflationary gap graph
no as the YFE is below Y1 so it is used unsustainably
when is there long run macro equilibrium
when AD = SRAS = LRAS
what is it called when YFE is produced where AD = SRAS = LRAS
no gaps so no name
what is macroeconomics
macroeconomics studies the behaviour of an economy in aggregate.
what are the three main parts of macroeconomics
- the connections between developed and developing countries
- includes effects of policies
- involves studying inflation, growth, progress in human development, trade and globalisation
what are the 6 main macroeconomic objectives
price stability (CPI inflation of 2%)
growth or real GDP (national output)
falling unemployment/rising unemployment
higher average living standards (national income per capita)
stable balance of payments on the current account
a more equitable distribution of income and wealth
