Unit 3 Vocab Flashcards
When there is falling aggregate output and rising aggregate prices
Stagflation
Keynesian Econ/ Classical
Key- wages aren’t flexible, horizontal AS, no self-adjustment, need for govt. interference
Classic- AS vertical, wages are flexible, self-adjustment
Exchange-Rate Effect/ Interest Rate Effect
E- exports get cheaper and imports get more expensive, so real GDP increases
I- less interest, so more I and C increase
Spending Multiplier or Expend. Multiplier
How much rGDP changes as a result of a change in aggregate expenditures
Variables that don’t change in Sr and Lr
SR- wages, capital stock, availability of natural resources
LR-real output, employment, and unemployment
Potential Output/ Full employment
Level of real GDP an Econ. Would produce if all prices were fully flexible
Short Run equil.
Happens at intersection of AD and SRAS
Business Cycle
The short-run alternation between recessions and expansions
Budget Balance
T- Tr- G
A standardized input used throughout the Econ
Commodity
A measure of the overall prices in the economy
Aggregate Price Level
The tendency of wages to change more slowly than overall prices
Sticky Wages
The value of all assets minus the value of liabilities
Wealth
The tendency for people to increase their consumption spending when the purchasing power of their wealth rise as as a result of the falling price level
Wealth effect
The portion of any new income that gets spent
MPC
