Unit 5 - 6.1: Fiscal/Monetary Issues and International Trade

when the government pursues expansionary policy which leads to an increase in the government deficit, causing the gov to issue bonds and borrow, raising the interest rate

the number of times in a year that an “average” dollar gets spent on goods and services

formula for velocity of money

what does each letter stand for in the velocity of money formula? ( letter = _____ / letter = ____ / letter = _____ / etc. )

a percent increase or decrease in the MS will lead to the same change in the price level

the business cycle is ______ driven

inflation rate and unemployment rate have a ________ relationship

shifts in AD will cause ________ _________ the (short run) phillips curve

a positive demand shock will cause _____ ______ along the Phillips curve

a negative demand shock will cause _____ ______ along the Phillips curve

a positive supply shock will cause SRPC to ______ ______

a negative supply shock will cause SRPC to ______ ______

what households expect inflation to be and they use this info to negotiate nominal wages

people base their expectations of inflation on _____ ________

if expected inflation increases, SRPC will ______ _______

if expected inflation decreases , SRPC will ______ _______

If inflation increases, people will demand that their nominal wages increase by ____ _____ ______ or else their _____ _____ will decrease

graph that shows the relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience (contracts are renegotiated)

any time the _____ ____ ___ __________ changes the LRPC will shift

the level of unemployment where LRPC intersects with the x-axis (use abbreviation)

the level of inflation that is associated with the natural rate of unemployment and unemployment rate at which inflation does not change over time (use lowercase abbreviation)

what does NAIRU stand for

the inflation rate where SRPC and LRPC meet (use caps abbreviation)

LRPC shifting left means that the NRU is _______ meaning there is a economic ______

LRPC shifting right means that the NRU is _______ meaning there is a economic _______

a summary of a country’s transactions with other countries

the balance of payments on goods and services plus net international transfer payments and factor incomes

money coming into the country (payments from foreigners)

money going into a foreign country (payment to foreigners)

______ _______ is sending or receiving money to/from someone in another country, which is also known as ______

exports are _____ for this account and imports are _______

payments for the use of factors of production owned by other countries

3 parts of factor income

the difference between the sales of financial assets to foreigners and the purchases of financial assets from foreigners during a given period

financial assets include _____, _____, and _______

interest earned on loans and bonds doesn’t go into the financial account, but into ______ ______ in the current account

purchases of assets by a government of central bank

purchases made by households

the difference of the financial account and current account must always equal _______

if there is a deficit in the current account, there must be a _______ in the financial account

if there is a surplus in the current account, there must be a _______ in the financial account