EXCHANGE RATES
An exchange of currency is occurring, what is happening
Foreign money is being bought with the money of your country of orgin
The Phillips curve shows the relationship between these two things
Value of wages and unemployment
Stabilization Policy
The use of government policy to reduce the severity of recessions and rein in excessively strong expansion
The difference in a new classical graph and Keynesian graph
The Keynesian LRAS is in three segments
The argument made by Keynesian economists
the economy is likely to be characterized by recessions and inflationary booms.
This will occur to a country's prices and GDP when its currency has a high exchange rate
Lower prices, higher GDP
The Phillips curve suggests what about how the government should treat inflation and unemployment
An example of stabilization policy
lowering interest rates, cutting taxes, and increasing deficit spending during economic downturns and raising interest rates, rising taxes, and reducing government deficit spending during better times (any example is correct)
When inflation rises in a new classical graph the affect on AD is ...
A rightward shift
The Keynesian solution to a recession
When a country faces political turmoil investors will do this
According to the Phillip's curve reducing unemployment what necessitate what
Boosting the aggregate supply of the economy
The type of policy that is used for stabilization
Monetary policy (raising and lowering interest rates)
The main issue with the Phillips curve
It does not take into account GDP or output
In a Keynesian framework what would be a specific government policy to fix a recession
A decrease in taxes and increase of investment
The two ways the government can manipulate currency
Tie the currency to another nations currency, and buy and sell its currency to keep its value stable
Supply side policies associated with the Phillip's curve
Vocational education, boosting college admission, raising quality of education
A stable economy will appear as what on a new classical graph
In a depression the AD on a Keynesian graph will move to where
Leftward, to the first segment of the graph
Classical has a straight LTAS line Keynesian has a curve LTAS
The real interest rate is raised in country A. This will effect the money supply in Country B and Money Demand in Country B in what way
Money supply in country B decreases, and Money demand in country A increases
Welfare benefits associated with the Phillips Curve
Family tax credit that creates an incentive to work
In the seventies an inflationary and unemployment cause the Phillips Curve representation of the economy to shift right. The government used monetary policy to try and shift the economy back. This is an example of what
Stabilization Policy
The main issue with the Phillips curve in the seventies
It was redundant
In a Keynesian framework the what is the solution to high inflation
Cutting of non welfare government spending