Term
| Increase in interest rates |
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Definition
Monetary Policy: Aggregate Demand Shifts Left
(Because: an increased cost of borrowing to firms and households, which reduces Consumption and Investment spending) |
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Term
| Decrease in interest rates |
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Definition
Monetary Policy: Aggregate Demand shifts right
(Because: reduced cost of borrowing to firms and households increase Consumption and Investment spend) |
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Term
| Increase in Government purchases |
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Definition
Fiscal Policy: Aggregate Demand shifts right
(Because: Government purchases are a component of AD) |
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Term
| Decrease in Government purchases |
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Definition
Fiscal Policy: Aggregate Demand shifts left
(Because: Government purchases are a component of AD) |
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Term
| Increase on Personal or Business income taxes |
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Definition
Fiscal Policy: Aggregate Demand shifts left
(Because: Consumption and Investment spending fall as taxes rise) |
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Term
| Decrease in Personal or Business income taxes |
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Definition
Fiscal Policy: Aggregate Demand shifts right
(Because: Consumption and Investment spending rise as taxes fall) |
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Term
| Increase in households' expectation of future income |
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Definition
Aggregate Demand shifts right because of household optimism
(Because: optimism on expected income
increases consumption spending) |
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Term
| Decrease in households' expectations of future income |
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Definition
Aggregate Demand shifts left because of household pessimism
(Because: pessimism of expected future
income decreases Consumption spending) |
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Term
| Increase in firms' expected future profits |
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Definition
Aggregate Demand shifts right because
of firms optimism
(Because: optimism increases firms investment spending) |
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Term
| Decrease in firms' expected future profit |
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Definition
Aggregate Demand shifts left because
of firms pessimism
(Because: pessimism decreases firms investment spending) |
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Term
| Increase in growth rate of domestic Real GDP compared to foreign Real GDP |
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Definition
Aggregate Demand shifts left
(Because: imports become cheaper than exports
which reduces overall Net Exports) |
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Term
| Decrease in the growth rate of domestic Real GDP compared to foreign Real GDP |
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Definition
Aggregate Demand shifts right
(Because: imports are more expensive than exports
which increases overall Net Exports) |
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Term
| Increase in the exchange rate of domestic currency relative to foreign currency |
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Definition
Aggregate Demand shifts left
(Because: imports become cheaper than exports
which decreases overall Net Exports) |
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Term
| Decrease in the exchange rate of domestic currency relative to foreign currency |
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Definition
Aggregate Demand shifts right
(Because: imports become more expensive than exports
which increases overall Net Exports) |
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Term
| Increase in the labor force or capital stock |
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Definition
Short Run Aggregate Supply shifts right
(Because: increases in the labor force or capital stock
increase a firms overall output) |
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Term
| Decrease in labor force or capital stock |
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Definition
Short Run Aggregate Supply shifts left
(Because: decreases in the labor force or capital stock
decreases a firms overall output) |
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Term
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Definition
Short Run Aggregate Supply shifts right
(Because: improvements in technology decrease firms cost of production and increase productivity) |
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Term
| Increase in the expected future price level |
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Definition
Short Run Aggregate Supply shifts left
(Because: workers and firms must increase prices and wages to compensate for inflation/increased price level) |
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Term
| Decrease in the expected future price level |
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Definition
Short Run Aggregate Supply shifts right
(Because: workers and firms must decrease prices to compensate
for deflation/decreased price level) |
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Term
| Increase in workers/firms adjusting to underestimated (higher) price levels |
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Definition
Short Run Aggregate Supply shifts left
(Because: workers and firms will increase wages and prices
to compensate for inflation) |
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Term
Decrease in workers/firms adjusting to overestimated (lower) price levels
|
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Definition
Short Run Aggregate Supply shifts right
(Because: workers and firms will decrease prices and wages
to compensate for delfation)
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Term
Unexpected increase in the price
of an important natural resource |
|
Definition
Short Run Aggregate Supply shifts left
(Because: the costs of production increase due
to rises in the cost of an important input) |
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