defination

the impact of the price level on consumption is the wealth effect

the impact of the price level on investment is known as the interest-rate effect

This impact of the price level on net exports is known as the ____________.

1. changes in government policies

2. change in the expectatiosn of households and firms

3. change in foreign variables

1.monetary policy

2. fiscal policy

the actions the Federal Reserve takes to manage the money supply and interest rates to pursue macroeconomic policy objectives

Changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives

High level of household optimism regarding their future income increases current consumption. This will shift aggregate demand to the right. When households are pessimistic regarding their future incomes, aggregate demand will shift to the right. Analogously, if firms are optimistic about future investment profitability, investment will increase and aggregate demand shifts to the right. If firms are pessimistic about future investment profitability, aggregate demand shifts to the left.

In firms and households in other countries buy fewer US goods or if firms and households in the US buy more foreign goods, net exports will fall, and the AD curve will shift to the left.

a curve that shows the relationship in the long run between the price level and the quantity of real GDP supplied

1. contracts make some wages and prices sticky

2. firms are often slow to adjust wages

3. menu costs make some prices sticky

     

menu costs the costs to firms of changing prices

• Increases in the Labor Force and in the Capital Stock
• Technology Change
• Expected Changes in the Future Price Level

An unexpected event that causes the short-run aggregate supply curve to shift.

in long-run macroeconomic equilibrium, the AD and SPAS curve intersect at a point on the LRAS curve

1. recession`

2. a decrease in the price level

1. an increase in real GDP

2. an increasee in the price level

A combination of inflation and recession, usually resulting from a supply shock.

1. potential real GDP increases continually, shifting the long-run aggregate supply curve to the right

2.during most years, the aggregate demand curve shifts to the righte

3. except during periods when workers and firms expect high rates of inflation, the short-run aggregate supply curve wil be shifting to the right

1. the end of the housing bubble

2. the financial crisis

3. the rapid increase in oil prices during 2008

A plan for increasing the quantity of money at a fixed rate that does not respond to changes in economic conditions.

The macroeconomic theories of Milton Friedman and his followers, particularly the idea that the quantity of money should be increased at a constant rate.

The macroeconomic theories of Robert Lucas and others, particularly
the idea that workers and firms have rational expectations.

a macroeconomic model that focuses on real, rahther than monetary, causes of the business cycle

1. the monetarist model

2. the new classical model

3. the real business cycle model