5.1 Fiscal and Monetary Policy Actions in the Short-Run
The term for the difference between actual output and potential output that policy actions are meant to close.
What is output gaps
The Short Run Phillips curve is _______ sloping.
What is downward
Increase in money supply will ______ Price Level.
What is Increase
During a budget surplus, the government's tax revenue is greater than government spending, so what happens to the debt?
What is Debt decreases
The measure that isolates the effects of changes in the population and focuses on the amount of real GDP per person.
What is Real GDP Per Capita
This Fiscal Policy tool causes the aggregate demand curve to shift to the right when it is used.
What is government spending
The Phillips Curve demonstrates the relationship between ________ and ________.
What is Inflation and Unemployment
The velocity of money is ____.
What is How “fast” is money moving / how many times money changes hands per time.
Country A is in inflation, the automatic stabilizers happen, what will this change do to the government budget?
What is Surplus
For a given population and a given quantity of labor employed, what will happen to aggregate production and income per capita if there is an increase in a nation’s capital stock?
What is Both will increase
The action that monetary policy takes to lower interest rates which results in an increase in aggregate demand.
What is decreasing interest rates
On the Phillips Curve graph, an inflationary gap is to the _____ of the LRPC.
What is left
What happens as a result of the central bank buying government bonds?
What is Lower interest rates, more borrowing and spending
On the loanable funds market, what are the two ways to show a crowding out caused by a government borrowing with a budget deficit
What is shifting the saving supply to the left or shifting the investment demand to the right.
Policies that include public investment in infrastructure like education, transportation and communication are examples of ______ fiscal policies.
What is Supply Side
To move the economy from a recessionary gap back to LRAS, fiscal policy can use a decrease in taxes or this action.
What is an increase in government spending?
LRPC represents ________ of employment.
What is the natural rate
The Equation of Exchange Formula is ____.
What is MV = PY
Country A is in recession, and the automatic stabilizers happen. What will the automatic stabilizers do to the taxes, government spending, government budget, and national debt?
What is: Taxes decrease, government spending increases, the government budget becomes a deficit, and increases the national debt.
If subsidies for research and development on new technologies lead to an increase in the average productivity of labor, what will most likely happen to real GDP per capita and LRAS for a given population size?
What is Both will increase
In an expansionary gap, this is the action monetary policy will take, which shifts AD to the left and causes the price level to decrease.
What is increasing interest rates
Supply and demand shocks shift ____.
What is SRPC
What is the Neutrality of Monetary Policy?
What is Changes in money supply have no effect on REAL variables in the long run
There is an expansionary period when government spending increases due to a budget deficit. In an ADAS graph, the AD will shift right because government spending increases, but after a while, why will the AD shift left?
What is Crowding Out
Country X invests in technology and education, raising productivity so its LRAS shifts right from $10 trillion to $12 trillion and its NRU falls from 5% to 4%. Country Y only expands its labor force, moving its PPC outward, but keeping LRAS at $10 trillion and unemployment at 5%. What would cause the NRU of Country Y also to decrease?
What is Reduced Structural and Frictional Unemployment