Aggregate Demand/Supply
The equation for AD.
What is AD = C + I + G + (X-M)?
The four components of the balance of payments.
What is the current account, capital account, financial account, and net errors and omissions?
A decrease in the rate of inflation.
What is disinflation?
A currency's value in terms of its real purchasing power.
What is the real effective exchange rate?
A regional group of countries that have entered into free trade agreements.
What is a trade bloc?
This type of AS has not had time for all factors of production to adjust to new market conditions.
What is short-run aggregate supply?
The four components of the financial account.
What are direct investment, portfolio investment, other investments, and foreign reserves?
Another word for "sustained increase in price levels."
What is inflation?
(Nominal exchange rate X Domestic price index) / Foreign exchange rate
What is the real exchange rate?
Both customs unions and economic unions use this as a tool to protect their member countries.
What is a common external tariff?
This always causes movement along an AS or an AD curve.
What is a price level change?
This account covers the sale of patents, trademarks, and copyrights.
What is the capital account?
This results from in an increase in the costs of production.
What is cost-push inflation?
A managed float has these. (HINT: Managed float rhymes with boat)
What are limits?
A situation where high-cost domestic production is replaced by more efficiently produced imports from within the customs union.
What is trade creation?
Keynesian economists think that the government must be involved to reach full employment, which is represented by type of curve.
What is a LRAS curve?
A growing domestic economy, declining economic activity in trading partners, and structural problems are all causes of a deficit in this account.
What is the current account?
An increase in the value of money.
What is deflation?
These determine floating exchange rates.
What are market forces?
A situation where trade with a low-cost country outside a customs union is influenced by higher-cost products supplied from within.
What is trade diversion?
"American Libertarian" is another term for this type of economist.
What is a new classical economist?
A deficit in this account is not necessarily a bad thing due to future inflow of profits.
What is the financial account?
This is caused by in increase in AD not matched by an equivalent increase in AS.
What is demand-pull inflation?
What is a fixed exchange rate?
A limit on exports or imports.
What is a quota?