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AP Macroeconomics > Unit 4 Exam > Flashcards

Unit 4 Exam Flashcards

1
Q

What explains shifts in SRAS?

A 
Productivity/Technology
Input costs "supply shocks"
Future Expectations about Prices
Government Policies 
(regulation, business taxes, subsidies)
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2
Q

AD Changes

Changes in Consumption

A 
Changes in disposable income
Credit conditions
Expectations regarding future prices
Value of assets (portfolio)
Tax policy
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3
Q

CF =

A

a + (MPC)Yd

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4
Q

Changes in Investment Spending

A 
Prices of capital goods
In technology
Planned inventories
Outlook about economy
Business taxes/subsidies
Existing stock of capital goods
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5
Q

real interest rate =

A

nominal interest rate - rate of inflation

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6
Q

Leakages

A

Savings
Taxes
Imports

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7
Q

Injections

A 
Investment
Transfer Payments
Subsidies
Govt Spending
Exports
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8
Q

APC =

A

C / Yd

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9
Q

APS =

A

S / Yd

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10
Q

(APC + APS) =

A

1

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11
Q

MPC =

A

change in consumption divided by change in disposable income

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12
Q

MPS =

A

change in spending divided by change in disposable income

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13
Q

Realistic MPC of U.S. economy

A

0.96

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14
Q

Simple Spend Multiplier

A

1 / (1-MPC)

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15
Q

What explains LRAS

A

change in land/labor/capital(stock)/entrepreneurship/technology

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16
Q

Investment in AS/AD

A

In the short run, I is considered part of AD

In the long run, I is considered parto f AS

17
Q

3 Factors in the SLOPE of AD

A

Real Balances Effect
Interest Rate Effect
Foreign Purchases Effect

18
Q

Classical Economists think AS shifts because…

A

Productivity (L,L,C,E), cost of inputs (supply shocks), exp. about inflation

19
Q

Keynesian

A

Belief in active government
Suspicion of market outcomes
Public spending and taxation have a crucial role in managing demand
Economy can be stable when not at employment

20
Q

Keynesian Stabilization Policy

A

Suggests active role for governments and central banks to manage AD
Artificially influencing AD to get economy close to full employment is known as STABILIZATION POLICY

21
Q

Two complementary varieties of Stabilization Policy:

A

Fiscal Policy

Monetary Policy

22
Q

Fiscal Policy

A

using the powers of the budget by government to influence C behavior (disposable income)

23
Q

Monetary Policy

A

A central bank’s ability to influence the size of the money supply in order to artificially stimulate investment spending (real interest rates)

24
Q

Economic Schools of Thought

A

Economic splits into classical, Keynesian, and supply-side. Keynesian splits into monetary and fiscal policy. Classical economy splits into neo-classical, rational expectations, and monetarists.

25
Q

Fiscal policy is conducted by…

A

Government through budget

26
Q

Monetary policy is conducted by…

A

the Federal Reserve

AP Macroeconomics (6 decks)

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