Stack #87663
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| T/F Economic flucuations are irregular and unpredictable | True
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| T/F Most macroeconomic quantities flucuate independently. | False
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| Fall output means what for unemployment | rising unemployment
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| Classic marcoeco says changes in money supply... | only affect nominal variables
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| Real and nominal variables are highly related in... | the short run
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| 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
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| Aggregate demand is related to...(eqn) | Y=C+I+G+(E-I)
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| Wealth effect | the real value of $$ is not fixed (changes in price level)
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| Lower the price level, the ___money households need to buy good and services. | Less
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| Lower interest ____ the quantity of demand. | increases
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| Higher price level...effect on demand and interest rate | raises interest rate, reduces investment and demand
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| Low price level...effect on interest rate and foreign currency exchange | low interest rate, investors go abroad, more supply of $$, value of dollar goes down
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| three reasons for fall in price level increasing demand | wealthier consumers, more invest (low interest rate), currecy depreciates -->demand for net exports
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| Shifts in aggregate demand curve (4) | changes in consumption, investment, gov't purchases, net exports
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| Cuts in taxes (ag. demand curve) | curve shifts right (encouraged to spend)
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| Decrease in money supply (short term interest rate, investment, agg. curve) | raises interest rate, less investment, curve goes left
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| NX change that causes ag. demand curve to shift right | other country goes into recession, buys less US product
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| in the long run, the agg. supply curve is... | vertical
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| why is agg. supply curve vertical in long run | depends on countries ability to turn its labor, capital, etc into goods and service
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| long run shifts in agg. supply...(4) | changes in labor, capital, natural resources, technological knowledge
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| Congress increase min wage (agg. supply curve) | natural unemployment goes up, curve goes left
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| T/F Overall price level does not affect ability to produce goods and services. | True
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| quantity of output supplied changes when... | price level deviates from the expected level
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| sticky wage theory | wages are slow to chang
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| HIgher than expected price level and wages | companies can take advantage of the cheaper labor costs, wages dont change until new contract
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| menu costs lead to... | sticky price theory
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| Increase in price level, short run agg. supply curve | reduces quantity of goods and services supplied, shift left
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| Variable the affect short run supply, not long run supply? | price level
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| shifts of agg. demands in short run | flux in output
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| shifts of agg. demands in longrun | affect overall price level, not outpu
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| Sept 11th and agg demand | shift demand left, uncertainity
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| period of falling output and rising prices | stagflation
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| T/F NCO=NX | True
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| US company sells overseas, US NX? NCO? | bhttp://www.studystack.com/AddCards.jsp?studyStackId=87663oth increase
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| T/F S=NX-NCO | False
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| Saving is smllar than investment and NCO is positive | trade deficit for country
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| dollars go from 115 yen to 125 yen | dollar appreciated by more japanese goods
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| real exchange rate | e(P/P*) e is exchange, P* foreign basket
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| If prices increase faster in US than Poland...(nominal rate) | nominal rate falls (polish per dollar)
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| US goods when dollar appeciates | more expensive relative to foreign good...exports down, imports up
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| Part of the demand for loanable funds, and the source of supply of dollars in the foreign exchange market | net capital outflow
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| real interest rate is a key determinate of | NCO
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| country gets budget deficit | real exchange rate appreciates loss in trade
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| impose restrictions on imports (foreign exchange, demand for loanable funds) | more demand for dollars, loanable funds equal
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| If gov't will default on debt... | raise interest rate...depreciate currency
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| rise in real wealth (agg demand) | increases demand
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| people hold less money, lend more and interest rate falls when... | price level decreases
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| T/F when price level falls, investors invest at hom | false
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| shift in agg demand to cause price level to fall and real GDP increase | shift left
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| investment tax credit... | agg demand right
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| vertcal, graphical rep of classical dichotomy, money neutrality | long run agg supply curve
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| more immigration and less min wage... | long run supply curve go right
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| Decrease in expected price level shifts... | short-run supply right
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| Long run price level and GDP with pessimism | price level lower, real GDP is same
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| policy to try and do what if supply shifts and contracts | shift demand right
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| Purchase by Japanese of US bond | decreases US net cap outflow
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| National saving (S)= | S = I + NX
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| the rate at which one person can trade the currency of one country for the currency of another | nominal exchange rate
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| arbitrage | process of taking advantage of different prices in different markets
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| Limtis to purchase power parity theory (2) | 1) goods not easily traded 2) goods are not perfect substitutes (think american vs. german cars)
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| demand for dollars by foreigners arising from net export exactly balances the supply of dollars from US net cap outflow | equilbrium exchange rate
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| too high real exchange rate | surplus in dollars supplied, the surplus would drive value of a dollar down
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| 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
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| import quota... | increase the demand for dollars, real exchange rate appreciates, Net exports =
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| T/F Trade polices affect the trade balance | False, NX = NCO
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| Net Exports | Export-Import
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| NCO | Purchase of foreign goods by residents - purchase of domestic by foreigner
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| When there is a trade ____ saving is more than investment | surplus
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| decrease in value of currency measured by amount of foreign currency it can buy | depreciation
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| Purchase power parity says nomial exchange rates depend on... | prices levels in those countries
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| As net capital outflow goes from negative to positive, real interest rate... | decreases
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| A higher interest rate at home makes... | domestic assets more attractive
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| Reduction in supply of loanable funds (NCO and exchange market) | NCO is less, less supply of dollars, real exchange rate appreciates
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| multipler effect | when governments make purchases in increase demand much more than dollar for dollar
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| Multiplier = | 1/(1-MPC)
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| MPC | marginal propensity to consume
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| Larger MPC... | greater effect of spending is
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| 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)
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| Explicit goal of US Employment ACt of 1946 | goverment hold itself accountable for short-run macroeco performance
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| Why active stablization? | Market reacts a lot to feeling, gov't should stabilize econ
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| Why not active stabilizatin? | 1) Policy has long lag 2) Use tools for long-term goals 3) large dependence on political process
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| Examples of automatic stablizers | Tax policy, welfare
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| Effect of higher real wealth... | simulates consumer spending and increases agg demand
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| Lower interest rate effect... | more investment spending and increases agg demand
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| Exchange-rate effect... | low interest rate moves investors overseas, real value of domestic goods falls increases agg demand
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