All Flashcards
What is the impact of increased government spending on aggregate demand?
It directly increases aggregate demand, leading to higher output and potentially higher prices.
What is the impact of lower interest rates on investment?
Lower interest rates make borrowing cheaper, encouraging businesses to invest more.
What is the impact of a tax cut on consumer spending?
A tax cut increases disposable income, leading to higher consumer spending.
What is the impact of contractionary monetary policy on inflation?
It reduces aggregate demand, helping to cool down the economy and lower inflation.
What is the impact of investing in infrastructure on long-term economic growth?
Improved infrastructure increases productivity and efficiency, leading to higher potential output.
What is the impact of reducing the national debt on future generations?
Lowering the national debt reduces the burden of interest payments on future taxpayers.
What is the impact of increased regulation on business investment?
Increased regulation can increase the cost of doing business, potentially decreasing business investment.
What is the impact of increased government spending on interest rates?
It can increase demand for loanable funds, potentially leading to higher interest rates and crowding out.
What is the impact of increased investment in research and development on economic growth?
It can lead to new technologies and innovations, increasing productivity and shifting the LRAS curve to the right.
What is the impact of supply-side fiscal policies on aggregate supply?
They aim to increase aggregate supply by incentivizing production and investment, often through tax cuts or deregulation.
What are the differences between fiscal and monetary policy?
Fiscal policy involves government spending and taxation, while monetary policy involves central bank actions to control the money supply and interest rates.
What are the differences between budget deficit and national debt?
A budget deficit is the annual difference between government spending and revenue, while the national debt is the total accumulation of past budget deficits.
What are the differences between the SRPC and LRPC?
The SRPC shows a short-run trade-off between inflation and unemployment, while the LRPC is vertical at the natural rate of unemployment, showing no long-run trade-off.
What are the differences between fiscal stimulus and fiscal restraint?
Fiscal stimulus aims to boost economic growth through increased spending or tax cuts, while fiscal restraint aims to slow down growth through decreased spending or tax increases.
What are the differences between demand-side and supply-side fiscal policies?
Demand-side policies focus on shifting aggregate demand, while supply-side policies focus on shifting aggregate supply.
What are the differences between nominal and real interest rates?
The nominal interest rate is the stated interest rate, while the real interest rate is the nominal interest rate adjusted for inflation.
What are the differences between automatic and discretionary fiscal policy?
Automatic fiscal policy refers to built-in stabilizers like unemployment benefits, while discretionary fiscal policy requires deliberate government action.
What are the differences between microeconomics and macroeconomics?
Microeconomics studies individual markets and decisions, while macroeconomics studies the economy as a whole.
What are the differences between leading and lagging economic indicators?
Leading indicators predict future economic activity, while lagging indicators reflect past economic activity.
What are the differences between structural and cyclical unemployment?
Structural unemployment arises from a mismatch of skills and available jobs, while cyclical unemployment is due to fluctuations in the business cycle.
Analyze an AD/AS graph showing the impact of expansionary fiscal policy.
The AD curve shifts to the right, increasing both price level and real GDP in the short run. In the long run, wages and prices adjust, potentially shifting the SRAS curve leftward.
Analyze an AD/AS graph showing the impact of contractionary monetary policy.
The AD curve shifts to the left, decreasing both price level and real GDP in the short run. This aims to reduce inflation.
Analyze a Phillips Curve graph showing the effect of a supply shock.
The SRPC shifts upward, indicating higher inflation for any given level of unemployment. The LRPC remains vertical at the natural rate of unemployment.
Analyze an AD/AS graph showing the economy operating below full employment.
The equilibrium is to the left of the LRAS curve, indicating a recessionary gap. There is potential for increased output without significant inflationary pressure.
Analyze an AD/AS graph showing the economy operating above full employment.
The equilibrium is to the right of the LRAS curve, indicating an inflationary gap. There is upward pressure on prices.
Analyze a graph showing the effect of increased government borrowing on the loanable funds market.
The demand for loanable funds increases, leading to a higher equilibrium interest rate.
Analyze a graph showing the impact of new technology on the PPC.
The PPC shifts outward, indicating an increase in potential output.
Analyze a graph showing the effect of increased investment in human capital on the LRAS.
The LRAS curve shifts to the right, indicating an increase in potential output due to a more productive workforce.
Analyze a graph showing the effect of a decrease in the money supply on aggregate demand.
The aggregate demand curve shifts to the left, decreasing both price level and real GDP in the short run.
Analyze a graph showing the effect of a tax increase on aggregate demand.
The aggregate demand curve shifts to the left, decreasing both price level and real GDP in the short run.