America grew
These three factors are the foundation of long-run economic growth according to modern theory.
What are resources, technology, and institutions?
This is the most commonly watched measure of the money supply in the U.S.
What is M2?
The economist who first warned that surprise inflation’s effects would vanish once expectations adjusted.
Who is Milton Friedman?
A voluntary trade between Idaho and Michigan benefits both parties because of this economic principle.
What is trade creates value?
This phrase describes the economy when actual output equals potential output (Y = Y*).
What is full employment output?
This model predicts poor countries should grow faster because of higher returns to capital.
What is Solow?
If the reserve requirement is 20%, a $100 deposit can lead to this maximum total increase in money supply.
What is $500?
The Phillips Curve relationship originally assumed that people form expectations using this method.
What are adaptive expectations?
This is the opportunity cost of 1 unit of food for China, given that it moves from 4 food and 8 clothing to 6 food and 4 clothing.
What is 2 units of clothing?
When the price level is higher than expected when contracts were signed, this happens to unemployment.
What is unemployment falls below u*?
If real GDP in the nation of Baggovia increases from $500 billion to $550 billion, and the population rises from 100 million to 110 million, this is the approximate growth rate of real GDP per capita.
What is 0%?
This happens to the money supply and the value of money when the Fed buys government securities.
What is an increase in the money supply and a decrease in the value of money?
When actual inflation is less than expected inflation, this happens to unemployment.
What is unemployment rises (u > u*)?
If China’s opportunity cost of making clothing is lower than Vietnam’s, China has this in clothing.
What is comparative advantage?
High and variable inflation typically causes people to do this with their time and resources.
What is spend less time producing and more time protecting wealth?
According to Solow II, this is the key driver of long-run per capita GDP growth.
What are exogenous technology shocks?
This phenomenon occurs when insured banks take more risks because depositors feel safe.
What is moral hazard?
If the real interest rate is 2% and expected inflation is 3%, this is the approximate nominal interest rate.
What is 5%?
A country that runs a current account deficit usually sees an increase of capital inflow. This is equation shows why.
What current account - capital account = 0?
This fiscal response is suggested by Keynesians when the economy faces a recession.
What is expansionary fiscal policy (increase AD by increase G or cut taxes)?
Economic aid tied to institutional reforms is consistent with this modern growth theory.
What is modern growth theory?
This happens to the money multiplier when people hold more currency outside the banking system.
What is it decreases?
This is what happens to the price level in the short run when aggregate demand increases due to a rise in consumer confidence.
What is an increase in the price level?
Over the past few decades, this has happened to the portion of the world’s population living on less than $2 per day.
What is it has decreased dramatically?
An unexpected decrease in aggregate demand in the short run causes this adjustment in resource prices over time.
What is resource prices fall and economy returns to full employment?