Monetary and Fiscal Policy Review

Flashcards covering key concepts related to monetary and fiscal policy, including their interactions, effects on the economy, and definitions of important terms.

Expansionary Monetary Policy

A policy that increases the money supply and decreases interest rates to stimulate economic activity.

Fiscal Policy

Government adjustments in spending and tax policies to influence the economy.

Aggregate Demand Curve

A curve that represents the total quantity of goods and services demanded across all levels of the economy at different price levels.

Long Run Aggregate Supply Curve

A vertical curve that represents the total quantity of goods and services supplied when the economy is at full employment.

Short Run Phillips Curve

A downward sloping curve that shows the inverse relationship between inflation and unemployment in the short run.

National Debt

The total amount of money that a country's government has borrowed and not yet repaid.

Crowding Out

A situation where government borrowing decreases private sector investment due to rising interest rates.

Velocity of Money

The rate at which money circulates in the economy, influencing nominal GDP.

Budget Surplus

A situation where government revenues exceed government expenditures.

Monetary Equation of Exchange

The formula M * V = P * Y, representing the relationship between money supply, velocity of money, price level, and real output.