All Flashcards
What is the impact of increased government spending on real GDP?
Increased government spending increases AD, leading to a rise in real GDP in the short run.
What is the impact of increased taxes on consumer spending?
Increased taxes reduce disposable income, leading to a decrease in consumer spending.
What is the impact of tariffs on the price level?
Tariffs increase production costs, decreasing SRAS and leading to a higher price level.
How does a reduction in corporate taxes impact SRAS?
It decreases production costs, shifting SRAS to the right.
What is the effect of expansionary fiscal policy on the AD-AS model?
Expansionary fiscal policy (increased government spending or decreased taxes) shifts the AD curve to the right, increasing both price level and real GDP.
What is the effect of contractionary fiscal policy on the AD-AS model?
Contractionary fiscal policy (decreased government spending or increased taxes) shifts the AD curve to the left, decreasing both price level and real GDP.
How does a subsidy for renewable energy affect SRAS?
A subsidy decreases production costs, shifting SRAS to the right.
What is the impact of increased regulations on businesses?
Increased regulations increase production costs, shifting SRAS to the left.
How does government investment in infrastructure impact AD?
It directly increases government spending (G), shifting AD to the right.
What is the effect of tax cuts on investment spending?
Tax cuts increase after-tax profits, which can encourage investment spending, shifting AD to the right.
How do increased consumer taxes affect AD?
Higher taxes reduce disposable income, decreasing consumer spending and shifting the AD curve left.
How do tariffs on imported inputs affect SRAS?
Tariffs increase the cost of resources for firms, decreasing SRAS and shifting the SRAS curve left.
How do cheaper exports affect AD?
Cheaper exports increase foreign demand, increasing net exports and shifting the AD curve right.
How do reduced corporate taxes affect SRAS?
Lower taxes decrease production costs for firms, increasing SRAS and shifting the SRAS curve right.
How does a decrease in consumer confidence affect AD?
A decrease in consumer confidence will lead to decreased consumer spending, shifting the AD curve to the left.
How does a technological advancement affect SRAS?
Technological advancements increase productivity, leading to a decrease in production costs and shifting the SRAS curve to the right.
How does an increase in government spending affect AD?
An increase in government spending directly increases aggregate demand, shifting the AD curve to the right.
How does a rise in global demand affect AD?
A rise in global demand increases net exports (X-M), shifting the AD curve to the right.
How does an oil crisis affect SRAS?
An oil crisis is a negative supply shock, increasing production costs and shifting the SRAS curve to the left.
How does a decrease in interest rates affect AD?
A decrease in interest rates encourages investment spending, shifting the AD curve to the right.
What is Aggregate Demand (AD)?
Total demand for goods and services in an economy at a given price level.
What is Short-Run Aggregate Supply (SRAS)?
The relationship between the price level and the quantity of goods and services firms are willing to supply in the short run.
Define Consumer Spending (C).
Household purchases of goods and services.
Define Investment Spending (I).
Spending by firms on new capital goods.
Define Government Spending (G).
Government purchases of goods and services.
Define Net Exports (X-M).
The value of a country's exports minus the value of its imports.
What is a Negative Supply Shock?
An unexpected decrease in resource availability that increases production costs and decreases SRAS.
What is a Positive Supply Shock?
An unexpected increase in resource availability that decreases production costs and increases SRAS.
Define resource prices.
The cost of inputs used to produce goods and services, such as labor, raw materials, and energy.
Define productivity.
The quantity of goods and services produced from each unit of labor input.