Term
Which four types of sending are represented by the AD curve?
(Think in terms of GDP = C + I + G + EX - IM) |
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Definition
(a) Personal consumption expenditures (C)
(b) Gross private domostic investments (I)
(c) Government consumption and gross investments (G)
(d) net exports (EX-IM) |
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Term
Define " the aggregate supply curve."
(Think in terms of the total quantity of goods and services) |
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Definition
A graph that shows the amount of output that will be produced and offered for sale at various price levels. |
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Term
| Define "cost-push inflation." |
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Definition
Inflation caused by an increase in costs. |
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Term
| Define "demand-pull inflation." |
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Definition
Inflation that is initiated by an increase in aggragate damand.
(too much sepending) |
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Term
| Define "easy monetary policy." |
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Definition
Fed policies that expand the money supply and lower interest rates in order to stimulate the economy. |
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Term
| Illustrate the market for a good by drawing the industry's demand and supply curves. on the graph, identify the equilibrium price and the equilibrium quantity. be sure to label all axes and curves. |
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Definition
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Term
| If the market price is less than the equilibrium price, what is the relationship of quantity supplied to quantity demanded? What will happen to the price? |
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Definition
The market goes into a state of excess demand or shortage; which will force the price to go up.
Pm < Pe Qs < QD ¨ shortage, P↑ |
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Term
| If the market price is greater than the equilibrium price, what will be created in the market, and what will happen to the price? |
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Definition
The market goes into a state of excess supply or a surplus; this condition will force the price to go down.
Pm > Pe Qs > QD .. Surplus, P↓ |
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Term
| Define "equilibrium price." When will it occur in a given market? |
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Definition
The price level at which the aggregate demand and aggregate supply curves intersect.
Pe QD = QsMarket cleared .. stable Pe and Qe |
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Term
| Draw the aggregate demand-aggregate supply model of the macroeconomic for the short run, assuming that the economy is in the expansionary phase of the business cycle. Label the aggregate demand and aggregate supply curves. Label the axes appropriately. |
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Definition
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Term
| Identify and describe changes in the AS-AD graph above that would result form demand-pull inflation. |
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Definition
| At less than full employment the AD curve shifts to right. |
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Term
| Identify and describe changes in the AS-AD graph above, which would result from cost-push inflation. |
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Definition
| Lower output at each price level causes AS curve to shift to left. |
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Term
| Identify and describe changes in the AS-AD graph above, which would result from the implementation of contractionary fiscal policy. |
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Definition
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Term
| Identify and describe changes in AS-AD graph above, which would result from the implementation of an easy monetary policy. |
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Definition
AD curve shifts to right. |
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Term
| State the final impact of cost-push inflation on the price-level and real output. |
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Definition
| Stagflation; higher price level, lower output level. |
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Term
| State the final impact of demand-pull inflation on the price-level and real output. |
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Definition
| price level increases and output possibly increases. |
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Term
| Define "contractionary fiscal policy," including the means by which it is achieved. |
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Definition
A decrease in government spending or an increase in net taxes aimed at decreasing aggregate output (income). |
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Term
| What in the final impact of contractionary fiscal policy on the price-level and real output? |
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Definition
Reduced or stabilized price level. |
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Term
| Define "expansionary fiscal policy," including the means by which it is achieved. |
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Definition
| An increase in government spending or a reduction in net taxes aimed at increasing aggregate output(income). |
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Term
| What is the final impact of expansionary fiscal policy on the price-level and real output? |
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Definition
An increase in income, an increase in the demand for money, and an increase ion the interest rate. Also called the crowding -out effect. |
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Term
| Identify the three Federal Reserve tools used to undertake an easy monetary policy. |
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Definition
Reduce the required reserve ratio.
Reduce the discount rate.
Buy securities in open market. |
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Term
| What are the impacts of an easy monetary policy on the price-level and real output? When would an easy monetary policy be appropriate? |
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Definition
Expands the money supply and lowers the interest rate. Appropriate when the economy needs stimulation. |
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Term
| Identify the three Federal Reserve tools used to undertake a tight monetary policy. |
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Definition
Increase the required reserve ratio.
Increase the discount rate.
Sale securities in the open market. |
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Term
| What are the impacts of a tight monetary policy on the price-level and real output? When would a tight monetary policy be appropriate? |
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Definition
Contracts the money supply and raises interest rates. Appropriate when the economy needs to be restrained. |
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