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Econ 202 Final

Stack #87663

T/F Economic flucuations are irregular and unpredictable True
T/F Most macroeconomic quantities flucuate independently. False
Fall output means what for unemployment rising unemployment
Classic marcoeco says changes in money supply... only affect nominal variables
Real and nominal variables are highly related in... the short run
curve that shows the quantity of goods and services households, firms, govn't and customers aboard want to buy and each price lvel aggregate demand
Aggregate demand is related to...(eqn) Y=C+I+G+(E-I)
Wealth effect the real value of $$ is not fixed (changes in price level)
Lower the price level, the ___money households need to buy good and services. Less
Lower interest ____ the quantity of demand. increases
Higher price level...effect on demand and interest rate raises interest rate, reduces investment and demand
Low price level...effect on interest rate and foreign currency exchange low interest rate, investors go abroad, more supply of $$, value of dollar goes down
three reasons for fall in price level increasing demand wealthier consumers, more invest (low interest rate), currecy depreciates -->demand for net exports
Shifts in aggregate demand curve (4) changes in consumption, investment, gov't purchases, net exports
Cuts in taxes (ag. demand curve) curve shifts right (encouraged to spend)
Decrease in money supply (short term interest rate, investment, agg. curve) raises interest rate, less investment, curve goes left
NX change that causes ag. demand curve to shift right other country goes into recession, buys less US product
in the long run, the agg. supply curve is... vertical
why is agg. supply curve vertical in long run depends on countries ability to turn its labor, capital, etc into goods and service
long run shifts in agg. supply...(4) changes in labor, capital, natural resources, technological knowledge
Congress increase min wage (agg. supply curve) natural unemployment goes up, curve goes left
T/F Overall price level does not affect ability to produce goods and services. True
quantity of output supplied changes when... price level deviates from the expected level
sticky wage theory wages are slow to chang
HIgher than expected price level and wages companies can take advantage of the cheaper labor costs, wages dont change until new contract
menu costs lead to... sticky price theory
Increase in price level, short run agg. supply curve reduces quantity of goods and services supplied, shift left
Variable the affect short run supply, not long run supply? price level
shifts of agg. demands in short run flux in output
shifts of agg. demands in longrun affect overall price level, not outpu
Sept 11th and agg demand shift demand left, uncertainity
period of falling output and rising prices stagflation
US company sells overseas, US NX? NCO? b increase
T/F S=NX-NCO False
Saving is smllar than investment and NCO is positive trade deficit for country
dollars go from 115 yen to 125 yen dollar appreciated by more japanese goods
real exchange rate e(P/P*) e is exchange, P* foreign basket
If prices increase faster in US than Poland...(nominal rate) nominal rate falls (polish per dollar)
US goods when dollar appeciates more expensive relative to foreign good...exports down, imports up
Part of the demand for loanable funds, and the source of supply of dollars in the foreign exchange market net capital outflow
real interest rate is a key determinate of NCO
country gets budget deficit real exchange rate appreciates loss in trade
impose restrictions on imports (foreign exchange, demand for loanable funds) more demand for dollars, loanable funds equal
If gov't will default on debt... raise interest rate...depreciate currency
rise in real wealth (agg demand) increases demand
people hold less money, lend more and interest rate falls when... price level decreases
T/F when price level falls, investors invest at hom false
shift in agg demand to cause price level to fall and real GDP increase shift left
investment tax credit... agg demand right
vertcal, graphical rep of classical dichotomy, money neutrality long run agg supply curve
more immigration and less min wage... long run supply curve go right
Decrease in expected price level shifts... short-run supply right
Long run price level and GDP with pessimism price level lower, real GDP is same
policy to try and do what if supply shifts and contracts shift demand right
Purchase by Japanese of US bond decreases US net cap outflow
National saving (S)= S = I + NX
the rate at which one person can trade the currency of one country for the currency of another nominal exchange rate
arbitrage process of taking advantage of different prices in different markets
Limtis to purchase power parity theory (2) 1) goods not easily traded 2) goods are not perfect substitutes (think american vs. german cars)
demand for dollars by foreigners arising from net export exactly balances the supply of dollars from US net cap outflow equilbrium exchange rate
too high real exchange rate surplus in dollars supplied, the surplus would drive value of a dollar down
How are the market for loanable funds, NCO, and currency exchanged tied together? Market for loanable determines real interest rate, RI rate determines NCO, NCO determins supply for foreign currency Xchange
import quota... increase the demand for dollars, real exchange rate appreciates, Net exports =
T/F Trade polices affect the trade balance False, NX = NCO
Net Exports Export-Import
NCO Purchase of foreign goods by residents - purchase of domestic by foreigner
When there is a trade ____ saving is more than investment surplus
decrease in value of currency measured by amount of foreign currency it can buy depreciation
Purchase power parity says nomial exchange rates depend on... prices levels in those countries
As net capital outflow goes from negative to positive, real interest rate... decreases
A higher interest rate at home makes... domestic assets more attractive
Reduction in supply of loanable funds (NCO and exchange market) NCO is less, less supply of dollars, real exchange rate appreciates
multipler effect when governments make purchases in increase demand much more than dollar for dollar
Multiplier = 1/(1-MPC)
MPC marginal propensity to consume
Larger MPC... greater effect of spending is
increase in gov't purchases increase agg. demand and increases money demand (2) increases interest rate, which paritally offsets rise in agg. demand (crowding out)
Explicit goal of US Employment ACt of 1946 goverment hold itself accountable for short-run macroeco performance
Why active stablization? Market reacts a lot to feeling, gov't should stabilize econ
Why not active stabilizatin? 1) Policy has long lag 2) Use tools for long-term goals 3) large dependence on political process
Examples of automatic stablizers Tax policy, welfare
Effect of higher real wealth... simulates consumer spending and increases agg demand
Lower interest rate effect... more investment spending and increases agg demand
Exchange-rate effect... low interest rate moves investors overseas, real value of domestic goods falls increases agg demand
Created by: ktoprani



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