Aggregate Demand
Aggregate Supply
Fiscal Policy
Consumption Function & The Multiplier
Vocabulary
100
The only factor that would change if there is movement on the aggregate demand curve.
What is the price level?
100
The slope of the short-run aggregate supply curve.
What is upward?
100
Government spending and taxation.
What is fiscal policy?
100
A linear equation that when graphed, shows how a household's spending varies with its disposable income.
What is consumption function?
100
New physical capital, new construction and additions to inventory.
What is investment?
200
This will happen if taxes are cut.
What is an increase in AD (or rightward shift)?
200
The slope of the long-run aggregate supply curve.
What is infinate (or vertical)?
200
An aggregate output level that is below full employment (or potential GDP).
What is a recession?
200
A change in spending on consumer goods caused by a change in disposable income.
What is the marginal propensity to consume (MPC)?
200
The fundamental facilities and systems serving a country, city, or area, as transportation and communication systems, power plants, and schools.
What is infrastructure?
300
This will happen if consumers feel optimistic about the future.
What is an increase (or rightward shift) in aggregate demand?
300
This will happen to the SRAS curve if there is a decrease in commodity prices.
What is an increase in SRAS (or shift to the right)?
300
When the government cuts taxes, increases spending, or both in order to pull the economy out of recession.
What is expansionary fiscal policy?
300
A change in saving caused by a change in disposable income.
What is the marginal propensity to save (MPS)?
300
Income once taxes have been paid.
What is disposable income?
400
This is what happens to investment spending when interest rates go up.
What is a decrease in investment (or leftward shift of AD)?
400
According to Keynes, in the short-run wages are _____
What is "sticky downward?"
400
An aggregate output level that is above full employment (or potential GDP).
What is an inflationary gap?
400
The MPC and the MPC must equal "this."
What is ONE?
400
When the government passes a law that changes taxes or spending.
What is discretionary fiscal policy?
500
This is the only government policy that has a DIRECT effect on aggregate demand.
What is government purchases of final goods and services?
500
According to classical economists like Adam Smith, in the long-run, wages are ____.
What is "flexable?"
500
When the government increases taxes, cuts spending, or both to reign in inflation.
What is contractionary fiscal policy?
500
The formula for the multiplier:
What is 1/1-MPC or 1/MPS?
500
Stabilizers that automatically kick in to smooth out the business cycle.
What are automatic fiscal policy stablizers?
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