Term
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Definition
| Which doesnt represent national saving |
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Term
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Definition
| what isnt a determinant of national saving and investment in a closed economy |
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Term
| what relation is required between saving and investment for goods market equilibrium |
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Definition
| saving must be equal to investment |
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Term
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Definition
| which of the following variables changes in order to bring saving and investment into equilibrium |
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Term
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Definition
| what is independent from disposable income and the real interest rate |
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Term
| a decrease in autonomous consumption |
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Definition
| which causes an increase in desired saving |
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Term
| real interest rate decreases, which causes desired investment to increase |
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Definition
| if desired saving increases what happens to the real interest rate and desired investment |
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Term
| the saving curve shifts to the left (down) |
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Definition
| if autonomous consumption rises |
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Term
| the ability to trade with other economies |
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Definition
| difference between closed and open economy? |
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Term
closed: goods market eq occurs when savings equals investments
open: savings doesnt have to equal investment |
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Definition
| how does goods market equilibrium differ in open or closed economies? |
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Term
| disposable income, the real interest rate and other variables like optimism and wealth |
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Definition
| according to the consumption function, what variables determine aggregate spending on consumer goods and services |
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Term
C= c + mpc(Y-T) -cr;
c=auto consumption expenditure
Y= AGG output
T=taxes
mpc=marginal propensity to consume
r=real interest rate
c= responsiveness of consumption expenditure to real interest rate |
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Definition
| consumption function formula explained |
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Term
| planned expenditure on goods and services must equal the actual amount of goods and services produced |
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Definition
| requirement for equilibrium in the goods market |
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Term
| equilibrium points in the goods market- combo of real interest rate and output |
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Definition
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Term
| as interest rate rises: consumption, investment and net exports fall, which lowers planned expenditure |
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Definition
| why does the IS curve slope downward |
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Term
| when Eq output changes at each given interest rate. factors that shift- auto consumption, auto investment, auto net exports, taxes, and gov purchases |
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Definition
| what causes IS curve to shift? |
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Term
| it indicates the relationship between the inflation rate and the real interest rate |
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Definition
| what is the monetary policy curve? |
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Term
| when inflation increases, supply of real money balances declines which increases the nominal interest rate and real interest rate in short run; when inflation rate increases, policymakers will also increase interest rates immediately |
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Definition
| why does monetary policy curve slope upward? |
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Term
| when the fed decides to raise the real interest rate at any given inflation rate, the MP curve shifts upward. easing (lowering the real interest rate at any given inflation rate) shifts the MP curve down |
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Definition
| how does an autonomous tightening or easing of monetary policy by the fed affect the MP curve |
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Term
| relationship of inflation rate and agg output at equilibrium |
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Definition
| what is the aggregate demand curve? |
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Term
| a rise in inflation makes the real interest rates rise, to reduce quantity of aggregate output |
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Definition
| why does the agg demand curve slope downward? |
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Term
| the negative relationship of unemployment and inflation |
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Definition
| what relationship does the short run phillips curve describe? |
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Term
| policymakers can increase inflation to decrease unemployment |
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Definition
| what does the phillips curve offer to policy makers? |
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Term
| unemployment will move toward natural rate regardless of inflation rate |
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Definition
| what relationship does the long run phillips curve describe |
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Term
| in the long run, expected inflation is taken into account when making work and hiring decisions |
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Definition
| why do long run and short run phillips curves differ? |
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Term
| increase the inflation rate by shifting the phillips curve upward |
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Definition
| according to phillips curve, an increase in expected inflation would |
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Term
| increase the inflation rate by shifting the phillips curve upward |
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Definition
| according to phillips curve, a price shock like an increase in oil prices would |
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Term
| decrease the inflation rate by moving downward and to the right along the phillips curve |
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Definition
| according to phillips curve, increase in unemployment gap would |
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Term
| total quantity of output supplied and inflation rate |
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Definition
| what relationship does the agg supply curve describe |
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Term
| inflation rate does not effect the output of an economy (labor, capital and technology do) |
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Definition
| long run agg supply curve is vertical because |
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Term
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Definition
| what causes a short run agg supply curve to shift upward (left)? |
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Term
| increase in available technology |
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Definition
| what could cause the long run agg supply curve to shift right? |
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Term
| Monetary policy and Agg supply |
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Definition
| what two graphs are upward sloping? |
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Term
autonomous tightening
autonomous easing |
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Definition
raising the interest rates to stimulate econ
lower the interest rates to promote growth |
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Term
| an increase in nominal and real interest rates |
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Definition
| taylor principle says that an increase in inflation leads to... |
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Term
| increase inflation rate by shifting the phillips curve upward |
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Definition
| a positive price shock would |
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