ad/as graph
Higher demand leads to
higher price level, higher inflation, and/or lower unemployment
When should a firm shutdown
When the variable costs is greater than the marginal revenue
What happens to the nominal interest rate when contractionary monetary policy is used
TC =
VC + FC
What is a nash equalibrium
a situation where no player could gain by changing their own strategy
What happens to the demand curve when there is an increase in consumer income for a normal good?
Demand Curve shifts to the Right
In the long run, when firms are making an economic profit, some firms will
Join the market
How does the government implement expansionary fiscal policy
Decreases taxes or increase government spending
Money multiplier =
1 / Reserve Ratio
What is a budget deficit
When a government is spending more than they are getting
How is stagflation shown in a ad/as graph
What are the differences between a monopoly and natural monopoly graph
In a natural monopoly, marginal cost is constant, and average total cost is always downward-sloping
If the government uses expansionary fiscal and monetary policy, what happens to the interest rates
Interest rates are indeterminate
CPI =
(Cost of Basket in Current Year / Cost of Basket in Base Year) x 100
What is the relationship between current account and financial account
They both must add up to 0. If one is positive then the other must be negative
What is the shape of the short-run aggregate supply curve, and why?
The SRAS curve is upward-sloping because, in the short run, higher prices can increase production profitability, encouraging firms to produce more.
In a monopoly, when is the marginal revenue inelastic
When marginal revenue is negative
During crowding out, what happens to private and public investment
C + I + G + (X – M)
What do the axis of the phillips curve show us
That there is an inverse relationship between inflation and unemployment in the short run but not the long run.
A low interest rate leads to
higher demand
On a perfect competition firm graph, what does the horizontal line represent
demand, profit, marginal revenue, and average revenue
What policy could be used to make a currency appreciate
Expansionary fiscal policy
Velocity of money =
price level * time frame / amount of money in circulation
A company decides to use a prime piece of land to build a factory rather than renting it out. The annual rental income forgone is $500,000. If the factory generates $700,000 in profit annually, what is the opportunity cost of building the factory, and should the company proceed?
Since the factory generates $700,000 in profit, the net benefit is $700,000 - $500,000 = $200,000 and yes the company should proceed