Shared Flashcard Set

Details

Shifts of AD and SRAS
Shifts of AD and SRAS Curves
22
Economics
Undergraduate 2
12/11/2012

Additional Economics Flashcards

 


 

Cards

Term
Increase in interest rates
Definition

Monetary Policy:  Aggregate Demand Shifts Left


(Because: an increased cost of borrowing to firms and households, which reduces Consumption and Investment spending)

Term
Decrease in interest rates
Definition

Monetary Policy:  Aggregate Demand shifts right

 

 

(Because:  reduced cost of borrowing to firms and households increase Consumption and Investment spend) 

Term
Increase in Government purchases
Definition

Fiscal Policy:  Aggregate Demand shifts right

 

(Because:  Government purchases are a component of AD)

Term
Decrease in Government purchases
Definition

Fiscal Policy:  Aggregate Demand shifts left

 

(Because:  Government purchases are a component of AD)

Term
Increase on Personal or Business income taxes
Definition

Fiscal Policy:  Aggregate Demand shifts left

 

(Because:  Consumption and Investment spending fall as taxes rise)

Term
Decrease in Personal or Business income taxes
Definition

Fiscal Policy:  Aggregate Demand shifts right

 

(Because:  Consumption and Investment spending rise as taxes fall)

Term
Increase in households' expectation of future income
Definition

Aggregate Demand shifts right because of household optimism

 

(Because:  optimism on expected income

increases consumption spending)

Term
Decrease in households' expectations of future income
Definition

Aggregate Demand shifts left because of household pessimism

 

(Because:  pessimism of expected future

income decreases Consumption spending)

Term
Increase in firms' expected future profits
Definition

Aggregate Demand shifts right because

of firms optimism

 

(Because:  optimism increases firms investment spending)

Term
Decrease in firms' expected future profit
Definition

Aggregate Demand shifts left because

of firms pessimism

 

(Because:  pessimism decreases firms investment spending)

Term
Increase in growth rate of domestic Real GDP compared to foreign Real GDP
Definition

Aggregate Demand shifts left

 

(Because:  imports become cheaper than exports

which reduces overall Net Exports)

Term
Decrease in the growth rate of domestic Real GDP compared to foreign Real GDP
Definition

Aggregate Demand shifts right

 

(Because:  imports are more expensive than exports

which increases overall Net Exports)

Term
Increase in the exchange rate of domestic currency relative to foreign currency
Definition

Aggregate Demand shifts left

 

(Because:  imports become cheaper than exports

which decreases overall Net Exports)

Term
Decrease in the exchange rate of domestic currency relative to foreign currency
Definition

Aggregate Demand shifts right

 

(Because:  imports become more expensive than exports

which increases overall Net Exports)

Term
Increase in the labor force or capital stock
Definition

Short Run Aggregate Supply shifts right

 

(Because:  increases in the labor force or capital stock

increase a firms overall output)

Term
Decrease in labor force or capital stock
Definition

Short Run Aggregate Supply shifts left

 

(Because:  decreases in the labor force or capital stock

decreases a firms overall output)

Term
Increase in technology
Definition

Short Run Aggregate Supply shifts right

 

(Because:  improvements in technology decrease firms cost of production and increase productivity)

Term
Increase in the expected future price level
Definition

Short Run Aggregate Supply shifts left

 

(Because:  workers and firms must increase prices and wages to compensate for inflation/increased price level)

Term
Decrease in the expected future price level
Definition

Short Run Aggregate Supply shifts right

 

(Because:  workers and firms must decrease prices to compensate

for deflation/decreased price level)

Term
Increase in workers/firms adjusting to underestimated (higher) price levels
Definition

Short Run Aggregate Supply shifts left

 

(Because:  workers and firms will increase wages and prices

to compensate for inflation)

Term

Decrease in workers/firms adjusting to overestimated (lower) price levels

 

Definition

Short Run Aggregate Supply shifts right

 

(Because:  workers and firms will decrease prices and wages

to compensate for delfation)

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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