AP Econ Unit 3 Flashcards
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| 8754174954 | aggregate demand (AD) curve | a curve that shows how a change in the price level will change aggregate expenditures on all goods and services in an economy | 0 | |
| 8754174955 | C, I, G, Nx | shift factors of AD | 1 | |
| 8754174956 | short run aggregate supply (SRAS) curve | a curve representing the total output and income of a nation produced at a range of price levels in a particular period of time | 2 | |
| 8754174957 | changes in input prices, productivity, government regulations/policies, and import costs | shift factors of supply | 3 | |
| 8754174958 | long run aggregate supply (LRAS) curve | a curve that shows the long-run relationship between output and price level | 4 | |
| 8754174959 | people will buy more products from a place where the money is less valuable than their money | exchange rates | 5 | |
| 8754174960 | fixed-wage/sticky wage period | another name for the short run expressing its relation to wages | 6 | |
| 8754174961 | labor market rigidities | why don't wages adjust in the short run? | 7 | |
| 8754174962 | minimum wages, labor unions, unemployment benefits | what are the labor market rigidities? | 8 | |
| 8754174963 | human capital | training/skill set of the labor force | 9 | |
| 8754174964 | wages | what is the largest determinant of SRAS? | 10 | |
| 8754174965 | supply/demand shock | any unexpected change in the aggregate supply or demand curve | 11 | |
| 8754174966 | recession | If the economy is operating at this point, it is experiencing a ________. | 12 | |
| 8754174967 | inflationary gap | the space between AD and AD1 is an ______________ _______ | 13 | |
| 8754174968 | recessionary gap | the space between AD and AD2 is a ____________ _________ | 14 | |
| 8754174969 | demand-driven | assume the economy is operatint at the intersection of SRAS and AD2. at this level of output, the economy is experiencing a _________ __________ recession | 15 | |
| 8754174970 | cost-push | assume the economy is operating at the intersection of SRAS2 and AD. at this point the economy is experiencing ______ _______ inflation. | 16 | |
| 8754174971 | demand-pull | assume the economy is operating at the intersection of AD1 and SRAS. at this point, the economy is experiencing _______ ____ inflation | 17 | |
| 8754174972 | stagflation | If the SRAS shifts to the left, then the economy experiences ________________ | 18 | |
| 8754174973 | change in capital stock, technology, population, human capital, or infrastructure | possible LRAS shifters | 19 | |
| 8754174974 | full employment | LRAS is situated at the ______ ____________ level of output | 20 | |
| 8754174975 | natural rate of unemployment | the amount of frictional unemployment that exists when the economy is at LRAS | 21 | |
| 8754174976 | fiscal policy | government intervention in an economy through spending or taxation | 22 | |
| 8754174977 | (decrease taxes or increase spending) | If the AD curve on the graph shifted due to fiscal policy, what did the government do? (two possible answers) |  | 23 |
| 8754174978 | marginal propensity to consume | the amount of change in income people will consume | 24 | |
| 8754174979 | MPC = change in consumption/change in income | formula for MPC | 25 | |
| 8754174980 | marginal propensity to save | the amount of change in income that will be saved | 26 | |
| 8754174981 | MPS = change in saving/change in income | formula for MPS | 27 | |
| 8754174982 | multiplier effect | a change in a component of total spending leads to a larger change in GDP | 28 | |
| 8754174983 | multiplier = change in real GDP/initial change in spending | formula for spending multiplier (in relation to GDP and spending) | 29 | |
| 8754174984 | multiplier = 1/MPS | formula for spending multiplier (in relation to MPS) | 30 | |
| 8754174985 | tax multiplier = (1/MPS)-1 | formula for tax multiplier | 31 | |
| 8754174986 | $20B | If the economy has a recessionary gap of $100B and a marginal propensity to consume of 0.8, how much money do we need to spend to close the gap? | 32 | |
| 8754174987 | MPC, multiplier | The higher the _______, the greater a nation's _________ will be | 33 | |
| 8754174988 | expansionary | __________ fiscal policy raises GDP | 34 | |
| 8754174989 | contractionary | __________ fiscal policy decreases GDP | 35 | |
| 8754174990 | automatic stabilizers | economic stabilizers that happen without any action from Congress | 36 | |
| 8754174991 | discretionary stabilizers | purposeful decision/acts of Congress; any law or bill that Congress decides will cause a change in the economy | 37 | |
| 8754174992 | unemployment insurance, progressive tax rate | give two examples of automatic stabilizers | 38 | |
| 8754174993 | inside lag | the time it takes to recognize a problem and decide what to do; could be months for fiscal policy | 39 | |
| 8754174994 | outside lag | the time it takes to implement a policy and have it affect the economy; could be just days for fiscal policy | 40 | |
| 8754174995 | deficit | the amount of money the government overspends in one year | 41 | |
| 8754174996 | surplus | the government is spending less than the country is making | 42 | |
| 8754174997 | AD falls, PL falls, output falls | If consumers become less confident, what will happen to the curves AND the price level & output? | 43 | |
| 8754174998 | government | what is the only entity large enough to change the AS/AD graph by itself and purposefully? | 44 | |
| 8754174999 | AD falls, PL falls, output falls, unemployment rises | If businesses expect consumer spending to decrease in the future, what will happen to the curves AND price level & output AND unemployment? | 45 | |
| 8754175000 | SRAS will increase and bring output back to equilibrium | If AD decreases in the short run, what will happen once wages adjust? | 46 | |
| 8754175001 | Wait out the fixed-wage period for supply to readjust because consumers do not have any incentive to increase spending in response to a shortage of supply (barring government intervention) | What is the economy's solution to stagflation and why? | 47 | |
| 8754175002 | change in government spending | What has a bigger effect on the economy: change in taxes or change in government spending? | 48 | |
| 8754175003 | 0.4 | Your income changes from $300 to $350 and you increase your spending from $170 to $200. What is your marginal propensity to save? | 49 | |
| 8754175004 | interest rate effect | when the price level increases, the interest rate increases and consumption decreases | 50 | |
| 8754175005 | net export effect | A change in the price level leads to a change in the relative prices of imports and exports | 51 | |
| 8754175006 | real balance effect | as the average price level decreases, the purchasing power of people's cash balances increases. this results in an increase in spending. | 52 | |
| 8754175007 | automatic stabilizer | As incomes rise, people pay a larger fraction of their income in taxes. This is an example of a(n) ____________________ ________________. | 53 | |
| 8754175008 | discretionary stabilizer | The government decides to cut personal income taxes. This is an example of a(n) _____________ ________________. | 54 |