Production and trade
Land, labor, capital, and entrepreneurship
What are factors of production
These change more slowly than product prices, causing the short run aggregate supply curve to be upward sloping
What are (sticky) input prices?
Supplemental nutrition support, unemployment benefits, and progressive income taxes
What are automatic stabilizers?
An index made up of the value of a market basket of goods used to measure inflation
What is consumer price index?
This model shows that income and spending are equal
What is the circular flow model
The price and quantity at which the market clears
What is equilibrium?
This measurement of money includes currency in circulation and demand deposits
What is M1 money?
To close a negative output gap of $100 million, a government can increase spending by only $10 million in an economy with an MPC of 0.1 due to this phenomenon
What is the spending multiplier?
In the identity known as the Fisher equation, the nominal interest rate is a function of the real interest rate plus this other variable
What is the expected inflation rate?
This can be calculated using the expenditures, income, or value-added approaches
What is Gross Domestic Product?
When increasing production of one good becomes more and more costly in terms of a second production alternative
This is due to improvements in productivity based on increases in physical capital, human capital, and/or technology
What is long-run economic growth?
An increase in government spending of $20 billion offset by an increase in taxes of $20 billion will have this impact on the GDP of the economy
What is a GDP increase of $20 billion?
Nominal GDP divided by real GDP times 100
What is the GDP deflator?
What is the natural or non-cyclical rate of unemployment?
A producer with a relatively lower opportunity cost
What is comparative advantage?
Inflation, real income, and banking technology
What are shifters of money demand?
These include the interest on reserve balances
What are administered rates?
Due to the fixed interest rate on loans, their group benefits from falling price levels
Who are borrowers?
People with full time jobs, underemployed workers, people searching for jobs
What are people in the labor force?
It costs Canada 1/2 corn to produce 1 maple syurp. It costs the U.S.A. 2 corn to produce 1 maple syrup. Both countries are willing to exchange 1 corn for 1 maple syrup.
What is mutually beneficial terms of trade?
This kind of inflation occurs when aggregate demand increases
What is demand-pull inflation?
When expansionary fiscal policy has a contractionary impact on the real interest rate
What is crowding out?
When prices don't change but nominal GDP increases
What is an increase in real GDP?
An increase in the number of this type of worker will cause a decrease in the unemployment rate and the labor force participation rate
What is discouraged workers?