Chapters 11 and 12
Help!
|
|
||||
|---|---|---|---|---|---|
| Aggregate Expenditure Model (AEM) | Consumption + Investment
🗑
|
||||
| Before Aggregate Expenditure Model | Laissez-Faire System (minimum government intervention)
🗑
|
||||
| How Market took care of problem before AEM? | Recession, lowered GDP, made unemployment go up, then Average price level dropped, wages dropped, demand for labor went up, unemployment went down, GDP went up
🗑
|
||||
| John Maynard Keynes | The General theory of employment, interest and money
🗑
|
||||
| Two arguments Keynes had | 1) Prices are inflexible downwards = prices don't easily come down
2) Savings do not always turn into investments
🗑
|
||||
| Say's Law | "Supply will create it's own demand"
Creates income (wages, rent, capital)
Income --> demand
🗑
|
||||
| Assumptions: | 1) Closed economy = no exports or imports
2) No government intervention = no role in economy
3) Savings = household savings
🗑
|
||||
| Equilibrium GDP = | Real GDP = Aggregate Expenditure
🗑
|
||||
| Multiplier | Change in Real GDP(output or input) / Change in Investment
Or
1 / 1-MPC
🗑
|
||||
| Leakage |
🗑
|
||||
| Injection | Investments or the purchase of capital goods
🗑
|
||||
| Inflationary expenditure gap | the amount by which an economy's aggregate expenditures at the full employment GDP exceed those just necessary to achieve full employment GDP
🗑
|
||||
| Recessionary Expenditure Gap | the amount by which aggregate expenditures at the full employment GDP falls short of those required to achieve the full employment GDP
🗑
|
||||
| Potential GDP = | Full employment
🗑
|
||||
| Foreign GDP | 1) Foreign GDP or Prosperity abroad--> Foreign GDP ^ Income ^ Demand ^ Imports ^Demand for goods ^--> Our exports ^ Net Exports ^
🗑
|
||||
| Exchange Rates | $ becomes stronger or appreciated = Net Exports ^
$ becomes weaker or depreciated = Net Exports down
🗑
|
||||
| Tariffs | Tax on imports-->increase the price of imports-->Quantity demanded down-->Imports down-->Net Exports ^
(can be good or bad)
🗑
|
||||
| Devaluations | Decreasing the value or your currency, government decreases currency
🗑
|
||||
| Aggregate Demand (AD) = | Aggregate Expenditure ( C+I+G+NE)
Price level ^ Demand down
Price level down Demand ^
🗑
|
||||
| Why AD has negative slope | 1 Real balance effect (wealth effect)>Price ^Wealth down AD down
2 Interest Rate Effect>Price^Demand for money^ Interest Rate^ Investment down, Consumption down, AD down
3Foreign Price Effect>Prices ^Exports down, Net Exports down, Imports ^,AD down
🗑
|
Review the information in the table. When you are ready to quiz yourself you can hide individual columns or the entire table. Then you can click on the empty cells to reveal the answer. Try to recall what will be displayed before clicking the empty cell.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
To hide a column, click on the column name.
To hide the entire table, click on the "Hide All" button.
You may also shuffle the rows of the table by clicking on the "Shuffle" button.
Or sort by any of the columns using the down arrow next to any column heading.
If you know all the data on any row, you can temporarily remove it by tapping the trash can to the right of the row.
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Created by:
Ktallen
Popular Economics sets