Macro AP review

GDP

C+I+G+Xn

labor force

number of people in labor force/working age population(100)

unemployment rate

unemployed/labor force (100)

NRE

frictional+stuctural

CPI

value of basket in given year/value of baket in base year (100)

unaticpated inflation does what to lenders?

hurts lenders (eroded purchasing power)

spending multiplier

1/MPS

cost push inflation

SRAS shifts left

demand push inflation

AD shifts right

negative output gap (long run self adjustment)

wages and prices drop and SRAS shifts right

what are two things included in automatic stabilizers?

transfer payments and progressive income tax

What is the effect of increased interest on bond prices?

Bond prices decrease

money multiplier

1/reserve ratio

how does buying bonds impact money supply?

money supply increases

Which system does admin rates and OMO have an effect on?

Limited reserves

What impacts ample reserves?

IOR

Fisher Effect

Increase in expected inflation causes nominal interest rates to increase.

What does real interest rate equal?

Nominal-expected interest rate

What happens inthe long run when interest increases (AD/AS impact?)

AS shifts right and a new LRAS is formed

What do current accounts include?

goods, services, transfers

What do capital accounts include?

stocks, currency bond

When is there a surplus in balance of trade?

More exports than imports

How does an increase in price level impact current account?

decreases

How does interest rate increase impact capital account?

increase

Do foreign investors benefit from high or low interest rates?

High

What happens to exports/imports when currency depreciates?

Exports increase, imports decrease

Change in GDP

Mult (Gov spending + exports)

PPC graph axes

x=capital goods y=consumer goods

business cycle axes

x=time y=real GDP

AD/AS graph

x=real GDP y=price level

Phillips curve

x=unemployment y=inflation

loanable funds market

x= quantity loans funded y=real interest rate

foreing exchange market

x=quantity y=currency

reserve market

x=quantity of reserves y=policy rate

What are the two “non X” graphs?

Phillips and money market