Unit 3: National Income and Price Determination

________- Occurs when the quantity of real output demanded is equal to the quantity of real output supplied.

________ to consume (MPC)- How much people consume rather than save when there is a change in income.

________- An economy- wide phenomenon that affects the costs of firms and the position of the SRAS curve, either positively or negatively.

If the ________ for output rises faster than the rising costs, producers have a profit incentive to increase production.

________ and productivity- Better ________ raises the productivity of both capital and labor.

________- The idea that an initial change in spending will set off a spending chain that is magnified in the economy.

________ substitution effect- Goods and services produced in other nations.

________- The amount by which full- employment GDP exceeds equilibrium GDP.

In other words, it measures how ________ increases or decreases when the government increases or decreases spending in the economy.

________- Imports decrease when the ________ between the dollar and foreign currency falls.

________- When the regulation of industries restricts their ability to produce, the short- run AS likely increases.

________ and delays can sometimes occur with the discretionary fiscal policy.

________ or environmental phenomena- For a nation as large as the United States, wars and natural disasters can decrease the short- run AS without permanently decreasing the level of full employment.

________ can exist at, above, or below full employment.

________- Deliberate changes in government spending and net tax collection affect economic output, unemployment, and the price level.

If taxes are lowered, the multiplier is smaller so to have the same increase in ________, the amount of taxes cut has to be larger than an increase in government spending.

________- When the economy operates beyond full employement, inflation becomes a problem, so the government might need to contract the economy.

Demand in the macroeconomy comes from four ________, which are used to calculate the real GDP.

It is typically used to counter the ________ or recessions.

________ usually occur when economy- wide input prices suddenly increase.

________ refers to permanent spending or taxation laws already on books that help regulate the economy.

To resume, ________ is the increases in government spending or lower net taxes meant to shift AD to the right.

________ might be the result of higher productivity or lower energy prices.

The ________ between the level of domestic output produced and the aggregate price level of that output.

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.

________ effect- Goods and services in the future.

In the macroeconomic long run, the ________ have enough time to fully adjust to market forces.

________ and anti- poverty programs are examples of automatic stabilizers during an economic boom or recession.

________ (X- M)- When sales to foreign consumers are high and purchases from foreign producers are low, the ________ increase.

AD measures the ________ spending by households, investment spending by firms, government purchases of goods and services, and net exports (exports minus imports)

________ also increase their consumption if they are optimistic about the future.

________- The amount by which equilibrium GDP exceeds full employment GDP.

________- Money and financial assets.

________ (AD)- The inverse relationship between all spending on domestic output and the aggregate price level of that output.

________ to save (MPS)- How much people save rather than consume when there is a change in income.

________ is typically designed to manipulate AD to "fix "the economy.

________- Real GDP is low and unemploymentis high when the economy suffers a recession.

________ to Save (MPS) is calculated by dividing the change in savings by dividing the change in disposable income.

________ to Consume (MPC) is calculated by dividing the change in consumption by dividing the change in disposable income.

The inverse relationship between all spending on domestic output and the aggregate price level of that output

Goods and services produced in other nations

If you put more money in the pockets of households, it is expected that they consume a great deal of it and save the rest

Firms increase investment if they believe the investment will be profitable

The government injects money into the economy by spending more on goods and services, by reducing taxes, or by increasing transfer payments

Exports increase with strong foreign economies

If American blue jeans become more popular in France, American AD increases

Imports decrease when the exchange rate between the dollar and foreign currency falls

Some taxes are aimed at producers rather than consumers

Occurs when the quantity of real output demanded is equal to the quantity of real output supplied

The amount by which full-employment GDP exceeds equilibrium GDP

The amount by which equilibrium GDP exceeds full employment GDP

Deliberate changes in government spending and net tax collection affect economic output, unemployment, and the price level

Real GDP is low and unemploymentis high when the economy suffers a recession

When the economy operates beyond full employement, inflation becomes a problem, so the government might need to contract the economy

If price levels do not change, especially downward, with changes in AD, then prices are thought of as sticky or inflexible