Preview

Economics Study Guide

Good Essays
Open Document
Open Document
980 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Economics Study Guide
Quiz #4 Study Guide

Chapter 16
What are the 3 views of the supply curve (describe & illustrate)
Keynesian view: AD is horizontal, a shift to the right in recession increases Q but not P. inflation becomes problem only after AD shifts past Q*, the production capacity
MONETARIST VIEW: changes in money supply affect prices, not output, AD shift to right increases inflation, AS is a long-run concept and is vertical
CONSENSUS VIEW: economists see an AS curve with an upward slope that increases near full employment. Inflation accelerates in that region of the curve as AD shifts right.
What is the Phillips curve
Increase in aggregate demand cause a trade-off between unemployment and inflation. As economy moves from point a to b to c, the inflation unemployment trade off shifts from point a to b to c
What is the inflationary flashpoint
-the output at which inflationary pressure intensify; the point on the AS curve where slope increases sharply.
Illustrate the goal of supply-side policy
What does a leftward shift of the AS curve do to the economy
-unemployment and inflation increase, output decreases
-tax increases, deteriorating human capital investment, costly regulation, trade restrictions
What are the 5 supply-side policy tools and specific strategies for implementation
-higher marginal tax rates for individuals and businesses
-increased taxes on saving and investment
-letting infrastructure deteriorate
-increased gov’t regulation
-increased trade barriers
How are the supply-side policy tools used differently than fiscal policy or monetary policy tools

Chapter 17
Describe & illustrate the difference between short-term and long-term growth

Increases in output result from increased use of existing capacity or from increases in that capacity itself. In part a the mix of output at point A doesn't make full use of production possibilities. We can get additional output by employing more of our available resources or using them more efficiently.

You May Also Find These Documents Helpful

  • Good Essays

    With large investment being placed into a new fiscal stimulus package, the resulting injection will significantly effect the level of economic output. However, the significance of this change depends greatly upon the positioning of the macro-economic equilibrium before the stimulus. This stimulus package qualifies itself to be a form of fiscal policy, and therefore a form government spending, which is a component of aggregate demand. Therefore due to this large monetary injection from behalf of the AD curve will undergo a rightward shift. That said, as demonstrated on the graph above that the economy is far from reaching full capacity utilization, therefore a shift right in the AD curve has very a slight effect on price level however, a significant change in real GDP. This is due to the fact the economy is still operating on the elastic side of the curve. Moreover, there is the possibility of a rightward shift in aggregate supply as a result of the stimulus injection. This therefore as a consequence will encourage firms to meet the demands of the surge in the aggregate demand curve through the purchase of capital goods in aid of production, new forms of technology and further investment in order to increase capacity utilization. Thus increasing economic output.…

    • 1236 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    Econ 204 Study Guide

    • 627 Words
    • 3 Pages

    • Say’s Law Keynesian Theory • Inherently unstable economy • Government intervention Modeling the macroeconomy • Aggregate demand(AD) • Why downward-sloping? o Real-balances effect o Foreign-trade effect o Interest-rate effect • Aggregate Supply(AS) • Upward-sloping & shape? o Profit effect 1. Sticky wages o Cost effect o Cost effect dominates in the long run & at higher levels of output • Macro equilibrium o 2 potential problems 1. Undesirability 2. Instability • AS shifts o Almost anything that changes costs of production in a wide range of US industries • AD shifts o Changes in consumer behavior, firms’ willingness to invest, changes in gov’t spending • Multiple shifts o Business cycles result from recurrent shifts in AD & AS Competing Theories of SR Instability • Demand-side theories o Keynesian…

    • 627 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    Econ 201 Study Guide O'Dea

    • 5432 Words
    • 22 Pages

    -A movement down the AD curve leads to a lower aggregate price level and higher aggregate output.…

    • 5432 Words
    • 22 Pages
    Powerful Essays
  • Better Essays

    Eco 372 Economic Analysis

    • 1636 Words
    • 7 Pages

    The aggregate demand may be unchanged based on these expectations. The initial forecast is positive. This would shift the demand to the right. However, the correction Mr. Bernanke makes lessens the degree of expectations. This will shift aggregate demand back. The actual degree of shifts to both AD/SAS is difficult to exactly ascertain.…

    • 1636 Words
    • 7 Pages
    Better Essays
  • Satisfactory Essays

    Homework

    • 780 Words
    • 4 Pages

    Increases in productivity reduce the per-unit production cost of output. By reducing per-unit production costs, increases in productivity shift the aggregate supply curve to the right.…

    • 780 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    5. In the long run, demand-pull inflation: The initial increase in aggregate demand moves the economy along its vertical aggregate supply curve.…

    • 550 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Econ 103 Mid

    • 947 Words
    • 4 Pages

    2. the shape of the AS curve is based on employment level and resource availability (1) horizontal part indicates a high level of unemployment because the resource of labor is available, employers can hire without increasing wages. This cause GDP to increase without an increase in price (2) upward slop is a strain on resources that are now not as commonly available. Firms can still increase production but not without increasing price. Both GDP and price increase. (3) vertical part represents full employment. There are no more resources available to increase production. So GDP remains constant. Inflation occurs because firms increase prices without increasing GDP.…

    • 947 Words
    • 4 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Holiday home 12 Eco

    • 403 Words
    • 2 Pages

    Market oriented supply side policies are better than interventionist supply side polices to boost economic…

    • 403 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    M2

    • 402 Words
    • 2 Pages

    During the recession, inflation occurs due to the economy. When inflation rises, jobs decrease, productivity decrease and prices are also high. This slows down the economy, to a fall that will then have to go…

    • 402 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    They say; hiring more employee’s or increasing workers’ pay will in effect put more money into people’s pockets, and therefore more money in circulation, increasing demand for goods, causing rising of prices and subsequently causing inflation.…

    • 727 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    * Can close an inflationary gap, can move the AD curve back toward long run equilibrium…

    • 4387 Words
    • 18 Pages
    Powerful Essays
  • Satisfactory Essays

    Many of us have heard our grandparents talk about the “good old days” when you could buy ice cream for a nickel or a movie ticket for a quarter, as opposed to now where a simple small ice cream cup is usually equivalent to about three dollars. Inflation is directly responsible for these rises in price. Today consumer price inflation is averaging at…….Theories for the cause of our countries inflation range between three theories that the demand for goods and services exceeds exsisting supplies, so prices skyrocket. Also, it is also believed through the cost-push theory that when producers raise prices in order to meet increased costs inflation also occurs. In addition, inflation occurs when there is too much money in the economy at once. High inflation has numerous negative effects on the economy. For example, it can virtually erode purchasing power. In an inflationary economy, a dollar cannot buy the same amount of goods as it did in the past, as I stated previously in my ice cream example. Inflation also can deteriorate…

    • 595 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Macroeconomic

    • 685 Words
    • 3 Pages

    The process through which money creation leads to a higher level of prices. Suppose again that the money supply curve shifts, reflecting an increase in the money supply.…

    • 685 Words
    • 3 Pages
    Good Essays
  • Better Essays

    marketing assignment

    • 1844 Words
    • 8 Pages

    The fashion industry in Singapore has since seen its growth in recent years with major big Europe and U.S brands entering the market such as H&M, Karen Miller and Abercrombie & Fitch. With the influx of foreigners and tourists in recent years, there is more demand in international brands of apparels. Forever21 being one of the pioneer brands to have started its business in Singapore since 2004 has to continue to stay competitive. This report will identify Forever21’s position in the industry and recommendations for the brand to stay competitive.…

    • 1844 Words
    • 8 Pages
    Better Essays
  • Satisfactory Essays

    National Economy

    • 333 Words
    • 2 Pages

    3. Supply-side economics was an answer to the Keynesian way of thinking about economics. It was felt that there was no longer a depression, and since Keynes’ theory worked for the depression, something had to change. However, that change was the old way of thinking, which focused on price instead of income.…

    • 333 Words
    • 2 Pages
    Satisfactory Essays