| A | B |
|---|
| unemployed | must be adult in labor force, looking for a job, unable to find a job |
| shifts in LRAS curve causes: | population changes, productivity changes, technology changes, long term changes in natural resources |
| stagflation | decrease in aggregate supply; inflation AND higher unemployment AND lower GDP |
| what causes the official unemployment rate to understate unemployment? | discouraged dropout workers not counted; underemployed workers not counted |
| (spending) multiplier | 1/marginal propensity to save |
| marginal propensity to save | percentage of extra money people save when they get a wage increase |
| marginal propensity to consume | percentage of extra money people spend when they get a wage increase |
| MPC + MPS = | 1 |
| shifts in AD curve causes: | Changes in: C, G, I, or Xn |
| changes in personal income taxes shift: | AD curve (consumer spending) |
| if an economy is in recession, wages are flexible, and the government does nothing, what happens? | wages fall and SRAS shifts right, and economy goes to full employment |
| In GDP equation, "I" includes | business spending on capital goods and changes in inventories |
| Does GDP take into account distribution of income? | Nope |
| autonomous spending or investment | independent spending or investment; think of it as "new" spending |
| nominal gross domestic product | GDP NOT adjusted for inflation; NOT real GDP |
| how would a decrease in income of a foreign nation's citizens affect our GDP? | it could lower it if they stop buying our exports |
| which aggregate supply curve is upward sloping? | short-run aggregate supply |
| sticky wages | the concept that in the short-run, wages are not flexible; this is why the SRAS curve is upward sloping |
| disposable income | money that people can spend; "take-home pay" after taxes |
| labor productivity | the ability of workers to produce a given level of output (goods and services) |
| economic growth | increase in real GDP; increase in production possibility; LRAS shift right |
| natural rate of unemployment | no cyclical unemployment (in USA, our natural rate is 4.5%) |
| Aggregate Demand = | consumption + investment + government spending + net exports |
| GDP | dollar value of all goods and services produced in a country's borders in a year |
| what can stimulate economic growth? | new technology, human capital investment, more productivity |
| inputs | things that go into aggregate supply (oil, labor, raw materials) |
| expansionary supply shock | an unexpected event that increases AS and produces economic growth |
| contractionary (negative) supply shock | an unexpected event that decreases AS and lowers GDP |
