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17 Cards in this Set
- Front
- Back
Steady-State
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Where investment is just enough to cover depreciation
[sf(k) = dk ], then capital per worker will remain constant: Dk = 0. |
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Golden Rule Level of Capital Accumulation
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The Golden Rule level of capital, the steady state value of k that maximizes consumption.
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Okun’s Law
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An approximate linear relationship between unemployment and real GDP
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Aggregate Supply
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The total amount of goods and services that firms are willing to sell at a given price level in an economy.
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Aggregate Demand
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The amount of goods and services in the economy that will be purchased at all possible price levels
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Supply Shocks
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Exogenous changes in agg. supply
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Leading Indicators
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Leading indicators are indicators used to predict the future of the economy
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Demand Shocks
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A sudden event that increases or decreases demand for goods or services temporarily
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Stabilization Policy
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Policy actions aimed at reducing the severity of short-run economic fluctuations.
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Keynesian Cross
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A simple closed economy model in which income is determined by expenditure.
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Tax Multiplier
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The change in income resulting from a $1 increase in T :
dy/dt = -MPC/(1-MPC) |
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IS Curve
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a graph of all combinations of r and Y that result in goods market equilibrium
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LM Curve
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graph of all combinations of r and Y that equate the supply and demand for real money balances.
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Government Purchases Multiplier
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The increase in income resulting from a $1 increase in G
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Theory of Liquidity Preference
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Says the interest rate is determined by money supply and money demand.
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Pigou Effect
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decreased P => increased (M/P)
=> incr. consumers’ wealth => incr. C => IS shifts right => incr. Y |
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Debt-Deflation Theory
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decr. P (if unexpected)
=> transfers purchasing power from borrowers to lenders => borrowers spend less, lenders spend more => if borrowers’ propensity to spend is larger than lenders’, then aggregate spending falls, the IS curve shifts left, and Y falls |