Term
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Definition
Aggregate demand curve Short-run aggregate supply curve Long-run aggregate supply curve |
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Term
| Aggregate demand curve slopes downward because |
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Definition
the wealth effect interest rate effect international effect multiplier effect |
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Term
| SAS curve is upward because |
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Definition
firms in the US adjust production to meet demand instead of changing price, some firms will raise prices when demand increases |
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Term
| LAS curve is______; when does it shift out?? |
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Definition
vertical; when available resources, capital, labor, technology, and/or growth-compatible institutions increase |
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Term
| Short-run equilibrium is where |
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Definition
| the SAS and AD curves intersect |
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Term
| Long run equilibrium is where |
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Definition
| the AD and LAS curves intersect |
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Term
| When the economy is in a short-run equilibrium, but not a long-run equilibruim; the SAS curve will shift... |
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Definition
| up or down to bring the economy bac to long-run equilibrium unless government policy shifts the AD curve first |
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Term
| When output exceeds potential, it is an inflationary gap and the SAS curve will |
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Definition
| shift up to eliminate the gap |
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Term
| When output is below potential, there is a recessionary gap and the SAS curve will shift |
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Definition
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Term
| Fiscal policy (definition) |
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Definition
| the change in government spending or taxes |
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Term
| Why is macroeconomic policy difficult to conduct?? |
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Definition
| because implementing fiscal policy is a slow process and we don't really know where potential output is |
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Term
The wealth effect, the interest rate effect, and the international effect cause the AD curve to... |
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Definition
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Term
| the long run supply curve is vertical because.. |
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Definition
| it shows that in the long run a higher price level will not bring about higher output |
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Term
| If the multiplier effect becomes stronger the AD curve becomes |
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Definition
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Term
| Shifts in the AD curve are: |
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Definition
foreign income, expectations, exchange rates, distribution of income (wealth effect, interest rate effect, international effect, monetary and fiscal policies, and the multiplier effect) |
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Term
| What shifts the SAS curve |
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Definition
changes in input prices productivity import prices excies and sales taxes |
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Term
| Increases in aggregate demand lead to increase in |
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Definition
| output and an increase in price level |
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Term
anything that increases costs of production will shift the... |
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Definition
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Term
| Changes in price level don't effect |
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Definition
potential output; LAS curve |
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Term
| In the SAS the price level |
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Definition
| increases as output increases |
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Term
Change in price level has ______ along the AD curve |
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Definition
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Term
| Change in demand has _____along the AD curve |
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Definition
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