econ3
Terms
undefined, object
copy deck
- APC and MPC are very ____ at low levels of DI (disposable income) but decline as DI rises
- high
- At low levels of disposable income, people spend more/less
- more (larger percent of their budget)
- Automatic Stabilizers
- Stabilizes the economy in times of bad and good conditions. (Pension plan, welfare, old age security)
- Both a competitive firm and a monopolist maximizes profits where ____
- MR = MC
- Discretionary fiscal policy
- The two ways government can cool or heat the economy: govt spending and taxation
- expenditure multiplier formula
- change in GDP = (change in AD)(1/1-MPC)
- Inflationary gap
- high GDP growth, high inflation. economy is heating up (so they'll use tight money policy)
- Multiplier effect
- The multiplied effect upon GDP that results from a change in people's income.
- Paradox of Thrift
- By attempting to save more money, we actually save less
- Recessionary Gap
- Low inflation, decreasing employment, low GDP
- tax multiplier formula
- change in GDP = -(change in taxes)(MPC/1-MPC)
- Two types of fiscal policy:
- Discretionary & automatic Stabilizers
- Types of unemployment:
- Demand-deficient (consumer spending is down = low demand for products. firms forced to fire some workers), Frictional (no job bu you're looking for one), Seasonal, Structural (fired cus of lack of skill)