The Phillips Curve
This curve shows the inverse relationship between inflation and unemployment.
Short-Run Phillips Curve (SRPC)
This theory states that MV = PY, where V is velocity.
The Quantity Theory of Money
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
This is typically measured as the percentage change in real GDP per capita.
Economic Growth OR Growth of Standard of Living
This is the shape of the Phillips Curve in the Long Run
Vertical Line
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 curve is the "cousin" to the LRAS and shifts out during growth.
The Production Possibilities Curve (PPC)
A negative supply shock (like an oil crisis) causes this shift in the SRPC.
Shift rightward/up
According to the "neutrality of money," this variable is unaffected in the long run.
Real GDP (Y)
To fund a deficit, the government must issue these to the public.
Treasury Bonds/Securities
Crowding out leads to a decrease in the accumulation of this type of capital.
Physical Capital
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%, this is the inflation rate.
7%
This occurs when tax revenues exceed government spending.
Government Budget Surplus
This "side" of the Loanable Funds graph shifts right when the gov borrows.
Loanable Funds Demand
This type of policy targets infrastructure and tech to shift LRAS right.
Supply-Side Fiscal Policy
At the intersection of the LRPC and SRPC, the economy is at:
This concept explains why doubling the money supply eventually doubles prices.
Monetary Neutrality
What does an increase in government spending do to the budget deficit? To the Loanable Funds demand?
The budget deficit increases. The Loanable Funds demand increases.
In the long run, crowding out does this to the economy's potential output.
It decreases the potential output OR keeps the potential output the same
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