terry choi sally park stacy tam tina tung. the total demand for final goods and services in the...
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Terry ChoiTerry ChoiSally ParkSally ParkStacy TamStacy TamTina TungTina Tung
The total demand for final goods and services in the economy at a
given time and price level
1. Consumer Expenditure
2. Investment
3. Government Spending
4. Net Export (Export- Import)
Wealth/ Income
Taxation
Expectation on product price
Indebtedness
Expectation on sale of products
Interest rate
New Technology
Business Tax
Increase/ Decrease government spending
Increase/ Decrease taxation
*** decision are mainly controlled by the political party in power
Exchange rate
Condition of other countries (Interdependencies between countries)
The total supply of goods and services that firms in a national
economy plan on selling during a specific time period
1. Inflationary Expectation
2. Resources Price
3. Action of Government
4. Productivity
Inflation in the future
future of business
Increase/ Decrease in resources price
Ex. Price of oil increase
Wages of employees
Taxation
Subsides
New technology
a factor of proportionality that measures how much an endogenous
variable changes in response to a change in some exogenous variable
1. Spending Multiplier
2. Tax Multiplier
3. Money Supply Multiplier
1
MPS+MPI
1
MPS+MPITM =(MPC)
1
reserve ratio
Interest rate investment
borrowing in the money market by government
When the quantity of real output demanded is equal to the quantity of real output supplied, the economy is said to be
in equilibrium
Equilibrium
short run only shows a temporary boom or bust within the economy; long run
reflects how the actual economy looks
Output
Price Level
Recessionary GapRecessionary Gap
Output
Price Level
Inflationary GapInflationary Gap
As an economy grows, there are always inflationary and recessionary periods. However, inflation or recession are not
permanent because the economy is always fluctuating
wages that do not adjust to market shortages of surpluses, also known as rigid or inflexible wages
wages that adjust to the supply and demand in a market
Steady prices that exist without the explanatory rationale
Prices which are able to adjust in either direction, as necessary to clear markets
Sticky Wages: worker’s salaries will not increase even if there is inflation
OROR
Flexible Wages: wages can also fall during shortages if there are no worker unions
Full employment- the “ideal” unemployment rate of an economy- Impossible to have 100% employment- Ideal in the US is 4%
Actual Employment- the actual unemployment rate of an economy- Employment rate in terms of the current
economy- Not an idealistic rate