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17 Cards in this Set
- Front
- Back
Economic fluctuation
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1)Irregular and unpredicable
2)Macroeconomic quanitties fluctuare together 3) As output falls, unemployment rises |
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Aggregate demand curve
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Other things equal, A fall in the economy's overall level of prices tends to raise the quantity of goods and services demanded
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Why curve slopes downward
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1)Wealth effect (C)
2)Interest rate effect (I) 3)Real exchange rate (NX) |
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Aggregate demand curve shift
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1-Changes in consumption
2-Changes in investment 3)Changes in Gvt purchase 4)Changes in NX |
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Why the long-run aggregate supply curve shift
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1)Changes in labour
2)changes in Capital 3)changes in natural ressources 4)Changes in technological knowledge 5) Short run add --> expectation of P level |
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Why does changes in P level affect output in the short-run
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1)Sticky wage theory
2)Sticky price theory 3)The misperceptions theory |
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Name 3 key facts about economic fluctuations?
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1)irregular and unpredictable
2)Most macroeconomics quantitites flucate together 3)output falls, unempl. raises |
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Which componnent of aggregate demand varies the MOST over the buisness cycle?
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Investment spending
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What are three reasons the aggregate demand curve slopes downward?
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Wealth effect
Interest rate effect Real exchange rate effect |
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7. If the economy is in a recession, why might policymakers choose to adjust aggregate demand to eliminate the recession rather than let the economy adjust or slef corecte on its own?
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They think they can get the economy back to the long run natural rate of output more quickly, or, in the case of a negative supply shock, they are more concerned with output and employment inflation
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Does a shift in aggragate demand alter output in the long run?
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No. In the long run, output is determined by factor supplies and technology. Changes in aggregate demand affect output only in the short run because relative prices are only temporarly altered
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Why a decrease in the money supply unlikely to be neutral in the short run?
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Lowers the price unexpectedly. Some prices and wages are sticky and adjust to the lower price level slower than others, causing a fall in output in the short run
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How didi the model of short run economic fluctuations develop?
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Of the grate depression 1930 - Keynes Recession can occur beauce of inadequate aggregate demand
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What causes both long and short supply curves to shift together?
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Changes in labour, capital, natural ressources, technlogy shift the short run and long run aggregate supply curve together.
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What causes short run aggreagate supply to shift, but not the longrun one?
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Changes in the expected price level only shift the short run cupply curve
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