Macro midterm

Phillips curve description

Phillips curve description

Unemployment on x axis, inflation on y axis, negative sloped

Nominal GDP=

Pyear of interest * Q year of interest

Real GDP=

Pbase year* Q year of interest

Laspeyeres Price Index

Base quantity

paache price index

Year of interest quantities

Price index =

Nominal/real*100

Real=

Nominal/price/100

unemployment rate=

# of unemployed/#unemployed + #employed

Labor force participation rate=

#labor force/# adult participation

Wealth effect

APL down, Real wealth up, RAO up

International effect

APL US down, US prices fall, US people buy more stuff, RAO up

When RAO increases

Unemployment rate decreases

a decrease in net income would

increase US imports and US net exports

on MEI a reduction of market rate interest would result in a

movement right along a given MEI function

During the great depression

the aggregate demand shifted left and the unemployment rates rose

When APL decreases

Unemployment rates increase

MPS

is slope of savings function

MPC

is slope of consumption function

Leakages=

S+T

Injections=

I+G+(X-M)

An equal increase in both government spending and taxes would

increase GDP by the same amount since Gov>Taxes

When above the equilibrium

unintended change is positive

When below the equilibrium

unintended change is negative