The Phillips Curve
This curve shows the inverse relationship between inflation and unemployment.
Short-Run Phillips Curve (SRPC)
Write out the Quantity Theory of Money Equation and show me!
This occurs when a government's annual spending exceeds its tax revenue.
Government Budget Deficit
When the government borrows money, this specific market's interest rate rises.
The Loanable Funds Market
What does GDP per capita indicate.
Standard of Living
Draw model
In the Quantity Theory of Money, this variable is assumed to be stable or constant.
Velocity of Money (V)
This is the total accumulation of all past annual budget deficits.
National Debt
As interest rates rise due to borrowing, this component of AD typically falls.
Investment (I)
This model also indicates economic growth by shifting "outward" just like the LRAS curve shows growth by shifting to the right. *Hint: These two models shift for the same reasons.
The Production Possibilities Curve (PPC)
A negative supply shock (like an oil crisis) causes this shift in the SRPC.
Shift rightward/up
To fund a deficit, the government must borrow from the...
Loanable funds market
Crowding out (public borrowing by the government) leaves who behind?
Private investment (C & I) part of the AD.
This term describes the amount of output a worker can produce per hour.
Productivity
This is the only way to move along the Short-Run Phillips Curve.
A change in Aggregate Demand (AD)
If the money supply grows at 10% and real GDP at 3%...how much will (P) change
7%
This occurs when tax revenues exceed government spending.
Government Budget Surplus
This "side" of the Loanable Funds graph shifts left when the gov borrows.
Loanable Funds Supply Curve
If fiscal policy (government spending) targeted infrastructure and tech to shift LRAS right....what side policy would that be?
Supply-Side Fiscal Policy
At the intersection of the LRPC and SRPC, the economy is at:
If the Money supply is $500 Billion, Real GDP (Y) is $2,000 Billion and the Price level is 1.5....calculate the Velocity of money.
V = 6
What does an increase in government spending do to the Loanable Funds demand curve and what happens to Real interest rates?
The Loanable Funds demand increases (shifts R) and increases the Real Interest Rate.
In the long run, crowding out does this to the economy's potential output.
It decreases the potential output OR keeps the potential output from growing.
This specific type of investment—which includes education, job training, and healthcare—is a primary driver of long-term increases in labor productivity.
Investment on Human Capital