ECON 102 - Chapter 12

These flashcards cover the key concepts from Chapter 12 of Macroeconomic Policy Revisited, focusing on fiscal and monetary policies, the Phillips Curve, and exchange rate systems.

Expansionary Fiscal Policy

An increase in government spending aimed at boosting aggregate demand (AD).

Crowding Out Effect

The reduction in private investment due to increased government borrowing, leading to higher interest rates.

Phillips Curve

A curve illustrating the inverse relationship between unemployment and inflation rates.

Supply-Side Economics

An economic theory that emphasizes increasing supply (production) over demand to foster economic growth.

Flexible Exchange Rates

A system where the value of currency is determined by market forces without direct government or central bank intervention.

Contractionary Monetary Policy

A policy that reduces the money supply and increases interest rates in order to lower inflation.

Monetizing the Debt

The practice of a government borrowing directly from its central bank, often viewed as potentially inflationary.

Fixed Exchange Rate

A currency system where a nation's currency value is tied or pegged to another major currency, providing stability.

Real-Balance Effect

An economic concept where consumers adjust their spending based on changes in the real value of their savings.

Foreign-trade Effect

The phenomenon where a change in price level results in a decline in competitiveness of domestic goods in international markets.