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34 Cards in this Set
- Front
- Back
when we say that potential GDP is exogenous with respect to the price level, we refer to...
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The fact that the long-run AS-curve shifts to the right over time.
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The Keynesian aggregate supply curve implies that....
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The price level is unaffected by current levels of GDP.
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When will AS-curve be horizontal?
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If Nominal wages do not change even if there is high unemployment.
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The slope of the AS-curve becomes steeper when?
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Wages become more flexible, and
as the economy approaches full employment. |
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A shift of the AD-curve to the right could be caused by...
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A decrease in taxes..
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A decrease in aggregate demand could be casued by.....
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A decrease in consumer confidence.
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Total Crowding out implies that?
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Every dollar increase in gov spending is offset by a dollar decreased in private spending.
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Neutrality of money means that money expansion.....
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Increases price, but leaves income and interest rates unchanged.
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Neutrality of money exists?
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In the classical supply curve case
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If Nominal wage rates were completely flexible, then..
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Fiscal policy would affect real money balances but not output..
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Wages are considered to be sticky rather than flexable since..
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Firms are unsure about their competitors behavior and only reluctantly change prices and wages following a change in aggregate demand.
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The link between Inflation and Unemployment is called...
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The phillips Curve.
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The coordination approach to the Phillips curve focuses on the fact that....
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Firms are unsure about their competitors behavior and are therefore reluctant to change wages and prices following a change in aggregate demand.
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The natural rate of unemployment is...
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The result of Labor market friction---People entering the labor force, changing careers ects.
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The upward sloping AS-curve will shift to the left if...
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Actual output is higher than the full-employment level.
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In an AS-AD model with an upward-sloping short-run AS-curve, which is most likely to occur if the gov. increases income taxes?
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Price and interest rates will decrease in the short and long run while output will be negatively affected in the short-run.
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In an AS-AD model with an upward sloping AS-curve, the most likely effects of fiscal expansion would be....
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An increase in prices and interest rates, but a decrease in real money balances......
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In an AS-AD model with an upward-sloping (Short-Run) AS-curve, what would happen if oil prices increased and the Fed responded by restricting money supply?
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Real output would decrease but we cant tell what would happen to prices...
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In the (Long-Run), real money balances are...
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Not affected with restrictive monetary policy, but increase if restricitve fiscal policy is employed.
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In the (Long-Run) an increase in the money supply will....
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cause both Nominal wage rates and the Price level to rise proportionately, leaving the real wage rate and output unchanged.
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In the static AD-AS model, what is the most likely Long-Run outcome of an oil price increases, if no policy change is implemented?
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Real wages decline, while
Levels of output and prices remain unchanged. |
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What is the Medium-Run result of an oil shock.
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A decrease in real GDP.
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The Sacrifice ratio is defined as..
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The % of output lost for each 1 percent reduction in the rate of inflation.
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Structural Unemployment is...
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The unemployment that exists at the natural rate of unemployment.
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Natural rate of unemployment will increase if...
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Unemployment benefits are increased.
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The natural rate of unemployment can be reduced by..
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training and skills programs that focus on teenagers and the long-term unemployed.
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Wage Indexation:
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Increases Nominal wages periodically in accordance with the increase in prices over a given time period.
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In an Adverse supply shock, wage indexation is likely to...
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Lead to a wage-price spiral.
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According to the Rational Expectations equilibrium approach...
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Unannounced changes in money supply temporarily chnage the level of output and prices.
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The Rational Expectation Equilibrium approach...
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Attemps to build macro theorys on Microeconomic foundations.
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Which of the following is NOT reflected in a shift of the AD-curve.
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A change in real money balances due to a change in the price level.
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If the Gov wanted to maintain a fixed level if aggregate demand, it would need to respond to a decrease in money supply by...
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Increaseing Gov transfer payments.
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Expansionary fiscal policy is very effective in increasing the level of actual output..
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If the economy is in a recession.
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The fact that Nominal wages are fixed by a contract at the beginning of a period while prices of goods may change within that period, implies that..
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Firms want to supply more output when prices increase since real wage rate is lower...
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