ECON Final Study Guide (Chapters 11, 12, 13, 15, 34)

ECON Final Study Guide (Chapters 11, 12, 13, 15, 34) -...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 11 (Keynesian Analysis) What is the graph for the Keynesian model ? (pg. 271) o A horizontal SRAS curve (because Keynes believed that prices, especially wages, would not be reduced even when aggregate demand decreased) o The equilibrium real GDP will be completely demand determined What is the graph for modern Keynesian analysis ?? (pg. 271) o An upward sloping SRAS curve and a vertical LRAS curve What are the determinants of aggregate supply? o Changes that cause an increase in AS (Table 11-2 on pg. 274) Discovery of new raw materials Increased competition Reduction in international trade barriers Fewer regulatory impediments to business Increase in the labor supply Increased training and education Decrease in marginal tax rates Reduction in input prices What are the determinants of aggregate demand? o Changes that cause an increase in AD An increase in the amount of money in circulation Increase security about jobs and future income Improvements in economic conditions in other countries A reduction in real interest rates Tax decreases A drop in the foreign exchange value of the dollar What is a recessionary gap ? (pg. 275) o The gap that exists whenever equilibrium real GDP per year is less than full- employment real GDP as shown by the position of the LRAS curve What does the graph look like for a recessionary gap? o Figure 11-11 on pg. 274 o The price level and the real GDP per year will decrease What is an inflationary gap ? (pg. 275) o The gap that exists whenever equilibrium real GDP per year is greater than full-employment real GDP as shown by the position of the LRAS curve What does the graph look like for an inflationary gap? o Figure 11-12 on pg. 275 o The price level and the real GDP per year will increase What is cost-push inflation ? (pg. 276) o Inflation caused by decreases in SRAS o The price level will increase while the real GDP per year will decrease (Figure 11-13) What is demand-pull inflation ? (pg. 276)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
o Inflation caused by increases in AD not matched by increases in AS How does a weaker dollar affect aggregate supply? o It will lead to higher input prices, where the SRAS curve shifts inward to the left. As a result, equilibrium real GDP falls, the price level rises, and unemployment increases o Figure 11-14 on pg. 278 How does a weaker dollar affect aggregate demand? o It will lead to more exports and fewer imports, where the AD curve shifts outward to the right. As a result, equilibrium real GDP and the price level will rise while unemployment decreases What are the net effects on inflation and real GDP? (pg. 278-279) o The equilibrium price level will rise, resulting in inflation. o
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/27/2009 for the course ECON 203 taught by Professor Al-sabea during the Fall '05 term at USC.

Page1 / 10

ECON Final Study Guide (Chapters 11, 12, 13, 15, 34) -...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online