AP Macro Econ Final set – Flashcards

Where MC intersects demand; the place where DWL is minimized

An increase in govt expenditures most likely means that they sold government securities, i.e sold bonds, i.e demanded loanable funds

Means that assets will leave, means that supply of loanable funds shifts to the left, increasing the interest rate

Exports - imports

The amount of money the US government owes to holders of US government securities

Borrowers and savers

The forgone benefit when resources are used for one purpose rather than another

(Price of basket in current year) / (Price of basket in base year) * 100. Note that this implies that the base year has an index of 100

Interest rate effect, wealth effect, net export effect

Increased transaction cost resulting from higher prices. The term results from the idea that at higher prices, people need to make more trips to the bank to get the money necessary for daily transactions

The cost of changing a listed price. The term originates from the need to change the price listing on a restaurant menu

The cost of having a less reliable unit of measurement. Inflation can reduce the effectiveness of money as a unit of account

The fraction of the population that is considered a part of the labor force

Unemployment that results from downturns in the business cycle

Sticky wages (fixed input costs in the short run)

If PL goes up, things are more expensive, so transaction costs increase, meaning that people put less money in the bank, less loanable funds, IR increase, less investment spending

If PL goes up, people have less real wealth, therefore will spend less

If PL goes up, IR goes up, Money is flowing in from other countries, value of the dollar appreciates, less exports