Term
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Definition
| an increase in the average of price |
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Term
| Relative prices as inflation occurs |
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Definition
| relative prices change because not all prices change by exactly the same percentage over time |
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Term
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Definition
| a year chosen as a comparison;always equal to 100 |
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Term
| the rate of inflation measured between two years with the consumer price index (CPI).value of 120 in 1998, 160 in 1999 |
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Definition
| the rate of inflation is the change in the CPI (40) divided by the original CPI (120) |
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Term
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Definition
| demand pull inflation and cost push inflation. |
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Term
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Definition
| a rise in the general price level resulting from an excess of total spending |
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Term
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Definition
| an increase in the general price level resulting from an increase in the cost of production |
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Term
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Definition
| measures changes in the average prices of consumer goods and services |
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Term
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Definition
| a reduction in the rate of inflation |
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Term
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Definition
| the actual number of dollars received over a period of time |
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Term
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Definition
| the actual number of dollars received (nominal income) adjusted for changes in CPI |
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Term
| what problems could not be analyzed by the Keynesian model |
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Definition
| the rise of unemployment and inflation |
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Term
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Definition
| the actual rate of interest without adjustment for the inflation rate |
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Term
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Definition
| the nominal rate of interest minus the inflation rate |
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Term
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Definition
| a home loan that adjusts the nominal interest rates of inflation |
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Term
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Definition
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Term
| investment demand schedule |
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Definition
| shows the amount of investment spending that would occur at different rates of interest |
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Term
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Definition
| British economist;noted that the economy can be in equilibrium at any level of GDP |
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Term
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Definition
| believed recessions would naturally cure themselves because the price system would automatically restore full employment |
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Term
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Definition
| The theory that supply creates its own demand |
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Term
| relationship between the GDP gap and the recessionary gap |
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Definition
| if the GDP gap is 100, the multiplier 5, the recessionary gap equals 20 |
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Term
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Definition
| the amount by which personal consumption expenditures exceed disposable income |
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Term
| the biggest short coming of the Classical macroeconomic theory |
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Definition
| could not account for the length and severity of the depression |
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Term
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Definition
| the part of disposable income households do not spend for consumer goods and services |
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Term
| if the CPI was 130 this year |
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Definition
| the prices are 30% higher in this year than the base year |
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Term
| Factors that overstate the inflation rate |
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Definition
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Term
| Why is a weighted average of price changes more appropriate than a simple average of price changes? |
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Definition
| simple average of the percentage increases in product prices |
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Term
| basic conclusion of Classical macroeconomic theory |
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Definition
| the economy could only be in equilibrium at full employment level of GDP |
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Term
| building blocks of Classical theory |
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Definition
| Say's Law and the interest rate would equal saving and investment |
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Term
| relationship between aggregate expenditures multiplier and marginal propensity to save (MPS) |
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Definition
| the aggregate multiplier is the reciprocal of the MPS |
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Term
| purpose of macroeconomic theory |
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Definition
| to predict and explain the behavior of macroeconomic variables and eliminate a gap |
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Term
| macroeconomic theory belongs to... |
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Definition
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Term
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Definition
| shows the total of aggregate expenditures |
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Term
| Real balances (wealth) effect |
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Definition
| a lower price level increases the value of the household wealth |
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Term
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Definition
| domestic price level falls, nominal interest rates decline, and investment expenditures increase |
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Term
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Definition
| lower domestic level will cause exports to rise and imports to fall |
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Term
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Definition
| a rise in the domestic price level will cause revenues from increased sales to exceed the additional costs increasing the level of output |
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Term
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Definition
| domestic price level rises, the marginal costs of production increase |
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Term
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Definition
| Keynesian range is horizontal and the intermediate range is upward sloping |
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Term
| factors that cause movement along an AD schedule |
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Definition
| a change in domestic price level |
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Term
| what impact does the shape of the AS schedule have on the ability of fiscal policies? |
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Definition
| the steeper the AS schedule, the greater the impact on the price level |
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Term
| supply side fiscal policy |
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Definition
| causes AS schedule to shift downward and to the right;cause price level to fall and level of real GDP to rise |
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Term
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Definition
| involves the taxing, spending, and borrowing powers of the government |
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