Unit 5: Long-Run Consequences of Stabilization Policies

________ curve- A graphical device that shows the relationship between inflation and the unemployment rate.

________ happens when the difference between tax revenues and government spending is positive.

________ (Cost- push inflation)- A situation in the macroeconomy when inflation and the unemployment rate are both increasing.

________- When the SRAS curve shifts outward and the AD curve stays constant, the price level falls, real GDP increases and the unemployment rate falls.

________- A nations knowledge of how to produce goods in the best possible way.

A change in the ________ does not affect the economy.

If the ________ of a country produces more output per worker from one year to the next, productivity has increased and the PCC shifted outwards.

________ incentives- Lower taxes mean workers take more of their pay home, which might prompt wage earners to work harder, take less time off, and be more productive.

The ________ develops monetary policy and is independent of Congress and the president.

________ is measured through real GDP per capita.

________ invest in physical capital and individuals invest in human capital.

When the ________ increases, an inflationary gap happens to cause an increase in real GDP to GDPi (lower unemployment rate) and an increase in the aggregate price level to PL2.

Improving ________ increases the quality of labor available, which causes an increase in economic growth.

A decrease creates inflation, lowers ________, and increases the unemployment rate.

________ happens when the government spends more than its received revenue.

________ is the largest demander for loanable funds.

________ can happen due to changes in monetary supply.

An increase in ________ is the best possible macroeconomic situation.

________- Natural resources that can replenish themselves if they are not overharvested.

________- A sustained falling price level, usually due to severely weakened aggregate demand and a constant SRAS.

________ leads to a decrease in inefficiency in building things.

The ________- The average number of times that a dollar is spent in a year.

Crowding out effect- It is the economic theory that ________ spending can lessen or eliminate private sector spending.

In an inflationary gap, ________ could be used to assist contractionary fiscal policy to put downward pressure on the price level.

________ and Cost- push are working together, which is the worst case with inflation.

A graphical device that shows the relationship between inflation and the unemployment rate

This inflation is the result of stronger consumption from all sectors of AD as it continues to increase in the upward-sloping range of SRAS

In the AD and AS models, a recession is typically described as falling AD with a constant SRAS curve

A sustained falling price level, usually due to severely weakened aggregate demand and a constant SRAS

When the SRAS curve shifts outward and the AD curve stays constant, the price level falls, real GDP increases and the unemployment rate falls

A situation in the macroeconomy when inflation and the unemployment rate are both increasing

A theory that asserts that the quantity of money determines the price level and that the growth rate of money determines the rate of inflation

A way to view the quantity theory of money

The average number of times that a dollar is spent in a year

It is the economic theory that public sector spending can lessen or eliminate private sector spending

The quantity of output that can be produced per worker in a given amount of time

When the quantity of physical capital in an economy is increased, in many cases, the capital helps increase the quantity of more capital

The amount of knowledge and skills that labor can apply to the work that they do and the general level of health that the labor force enjoys

Productive resources provided by nature

Natural resources that cannot replenish themselves

Natural resources that can replenish themselves if they are not overharvested

A nations knowledge of how to produce goods in the best possible way

Fiscal policy centered on tax reductions targeted to AS so that real GDP increases with very little inflation

A reduction in taxes for firms that invest in new capital like a factory or piece of equipment

Lower taxes mean workers take more of their pay home, which might prompt wage earners to work harder, take less time off, and be more productive

Lowering the tax rate on profits increases the expected rate of return and encourages more investment