When the economy is producing below ________ or potential output, the process works in reverse.
New cards
2
international trade effect
The ________: In an open economy, a lower price level will mean that domestic goods become cheaper relative to foreign goods, so the demand for domestic goods will increase.
New cards
3
level of income
The relationship between the ________ and consumer spending is known as the consumption function.
New cards
4
Adjustments
________ in wages and prices take the economy from short- run equilibrium to long- run equilibrium.
New cards
5
part of consumption
The by represents the ________ that is dependent on income.
New cards
6
wealth
The ________ effect: the increase in spending that occurs because the real value of money increases when the price level falls.
New cards
7
price system
Normally, the ________ efficiently coordinates what goes on in an economy.
New cards
8
Input prices
________ (wages and materials): Increase in ________ will increase firms costs.
New cards
9
marginal propensity
The ________ to save (MPS) is defined as the ratio of additional savings to additional income.
New cards
10
MPC
It is the product of a fraction, b, called the marginal propensity to consume (________), and the level of income, or y, in the economy.
New cards
11
physical capital
In the long run, the output is determined solely by the supply of human and ________ and the supply of labor, not the price level.
New cards
12
Long run
________ aggregate supply curve: A vertical aggregate supply curve that reflects the idea that in the ________, the output is determined solely by the factors of production and technology.
New cards
13
price level
As the ________ or average level of prices in the economy changes, so does the purchasing power of your money.
New cards
14
Ca
________ is a constant and is independent of income which is called autonomous consumption spending.
New cards
15
Short Run
Stagflation: A decrease in real output with increasing prices 9.4 From the ________ to the Long Run.
New cards
16
Supply shocks
________ are external events that shift the aggregate supply curve.
New cards
17
aggregate demand curve
The ________ (AD) shows the relationship between the level of prices and the quantity of real GDP demanded.
New cards
18
price system
The ________ provides signals to firms as to who buys what, how much to produce, what resources to use, and from whom to buy.
New cards
19
MPC
The ________ tells us how consumer spending will increase for every dollar that income increases.
New cards
20
price system
On a day- to- day basis, the ________ works silently in the background, matching the desires of consumers with the output from producers.
Studied by 1 person
Note 
Flashcard (75)