AP Macro Unit 3 Test

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AD and AS curves are used to illustrate changes in ______ and the _____ of an economy
Real output & price level
The AD curve is pointed _____
The direction of the AD curve is due to the _______, __________, and the ________
Interest Rate effect, Wealth effect, net export effect
The wealth effect is also called the ________
Real-balance effect
The SRAS curve is pointed ______
The direction of the SRAS curve is explained by ________
fixed output costs
The marginal propensity to consume (MPC) is ________
the additional consumption spending from an additional dollar of income
The marginal propensity to save (MPS) is _____
the additional savings from an additional dollar of income
The spending _______ shows the relationship between changes in spending and the maximum resulting changes in real GDP
Spending Multiplier
C + I + G +Xn
Changes in SRAS can be caused by changes in _____
Input prices, productivity, the legal institutional environment, and the quantity of available resources
Two types of inflation
demand-pull inflation and cost-push inflation
when high unemployment occurs with high inflation
Long run equilibrium can only occur at ________
full employment
Government actions that may increase or decrease aggregate demand
Fiscal policy
Used to try to increase aggregate demand during a recession
Expansionary fiscal policy
In an expansionary fiscal policy the government may
decrease taxes, increase spending, or do a combination of the two
Used to try to decrease aggregate demand when the economy is overheating (inflation)
Contractionary fiscal policy
In a contractionary fiscal policy the government may
increases taxes, decrease spending, or both
The federal government must take deliberate action or pass a new law changing taxes or spending
Discretionary fiscal policy
Change in government spending or taxes without new laws being passed or deliberate action being taken
Automatic Fiscal policy
Categories: Macroeconomics