Transcript APJEOPARDY!8,9,10.revised

JEOPARDY!
DOUBLE JEOPARDY
The Gap
Multiplier
Lines
Review
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What kind of gap will likely
result if there is “not enough”
spending?
Recessionary (unemployment) gap
What will result if the demand
equilibrium falls to the left of the
potential GDP?
Recessionary (unemployment) gap
What will result if the demand
equilibrium falls to the right of
the potential GDP?
Inflationary gap
How is it possible to have a
recessionary gap without
currently being is a recession?
Output and income are increasing,
while still falling short of full
employment
A classical economist would
recommend doing this when
experiencing a recessionary gap.
Nothing
An additional dollar introduced
into the economy is likely to be
spent many times over. This
phenomenon is best described by
what key term?
The multiplier
This reduces the size of the
multiplier
Inflation (Positive slope of supply
curve)
If the aggregate supply curve is
vertical, the actual value of the
multiplier will be this.
Zero
The Marginal Propensity to
Consume is .8. What is the
(oversimplified) multiplier?
5
The multiplier may be expressed
as the equation that describes the
sum of an infinite geometric
progression. What is this
equation?
Multiplier = 1/1-MPC
Graphically, demand equilibrium
can be found at the intersection
of what two lines?
45 degree, Aggregate Expenditure
The line that displays all of the
points at which demand may be
at an equilibrium.
45 degree line
The graph of the total quantity of
goods and services produced at
each possible price level.
Aggregate Supply Curve
Higher wages will lead the
aggregate supply curve to shift in
which direction?
Left
A shift in the demand curve will
correspond exactly to what?
Multiplied change in expenditure
This is calculated by pricing
several hundred items in a market
basket and is used to compare
real price levels.
CPI
Complete the formula:
_________ = Aggregate Demand
(GDP)
C+I+G+(X-IM)
What will result if consumer
spending exceeds income?
Dis-saving
Shows the relationship between
total consumption and total
disposable income
Consumption Function
DAILY DOUBLE!
Complete the equation Income –
Taxes = ?
DI
 C = 40.  DI = 50. MPC = ?
.8
DOUBLE JEOPARDY!
Final Jeopardy!
Supply
Labor
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Hodge
Podge
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Alex Trabeconomics
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This accounts for 70-80% of the
cost of all inputs across the
economy
Wages
Profit per unit = ?
Price – cost per unit
The amount of output produced
by a unit of input
Productivity
DAILY DOUBLE
This term is defined as a situation
in which neither consumers nor
firms have any incentive to
change their behavior.
Equilibrium
Inflation that occurs when the
economy is growing slowly or in
recession
Stagflation
List two factors that may
influence investment (I).
Confidence/Expectations, Growth of
Demand, Technical Change, Interest
Rates, or Taxes
An increase in consumer
spending that stems from an
increase in consumer incomes.
Induced increase in consumption
An increase in consumer
spending without any increase in
income.
Autonomous increase in consumption
DAILY DOUBLE!
The idea that an effort by a nation
to save more may simply reduce
national income and fail to raise
total saving.
Paradox of Thrift
As aggregate demand increases,
what are net exports likely to do?
Decrease
If labor is responsive to changes
in price levels, what kind of slope
will AS have?
Vertical
If labor insists on maintaining
rigid wages, what will happen to
price levels as the demand curve
shifts?
It will change very little
If the AS curve is relatively flat,
how will the real multiplier relate
to the simplified multiplier?
It will be very close
If labor insists on maintaining
rigid wages how will the real
multiplier relate to the simplified
multiplier?
It will be very close
If labor’s contracts are directly
linked to fluctuations in the CPI,
what will be the value of the real
multiplier?
Zero
Popular food icon seen below/
The intersection of aggregate
expenditures and the 45 degree
line
• Chef Boyar-demand
equilibrium
Shows the total amount of
output producers will produce
at given price levels across the
economy/ Survivor’s most
famous song (Yo, Adrian!)
Aggregate Suppl Eye of the Tiger
Bus driver shown here/ a change
in spending that is not due to a
change in income.
• Otto nomous increase
in spending
She once was a member of the glee club
but now she is a student at Yale/ an
increase in consumer spending due to
greater output in the economy.
• Quinn-duced increase
in consumption
He starred in Caddy Shack,
Kingpin, What About Bob, and
many others/ gap which results
from not enough investment.
• Bill Murraycessionary Gap
Assume the shift in AD is due to a
change in investment of 100 units. Find
the value of the simplified multiplier
Price Level
120
110
Series1
100
Series2
90
Series3
D
80
6500
6000
5500
5000
4500
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3500
3000
GDP