| Term | Definition |
|---|
| As P increases, Qd decreases and vice versa | State the Law of Demand |
| As P increases, Qs increases and vice versa | State the Law of Supply |
| substitute goods | Beer and wine are examples of what type of goods? |
| complementary goods | Peanut butter and jelly are examples of what type of goods? |
| change in income, change in preferences, change in prices of related goods | What 3 factors cause a demand curve to shift? |
| change in resource prices, change in technology, change in taxes, change in quotas | What 4 factors cause a supply curve to shift? |
| elastic | If the percentage change in quantity demanded is greater than the percentage change in price, demand for the good is what? |
| inelastic | If the percentage change in quantity demanded is less than the percentage change in price, demand for the good is what? |
| unit-elastic | if the percentage change in quantity demanded is the same as the percentage change in price, demand for the good is what? |
| inelastic | If the percentage change in quantity supplied is less than the percentage change in price, supply is what? |
| elastic | if the percentage change in quantity supplied is greater than the percentage change in price, supply is what? |
| unit-elastic | if the percentage change in quantity supplied is the same as the percentage change in price, supply is what? |
| negative externalities | gasoline and cigarettes create what when they are produced, used, or discarded? |
| tax | what price mechanism can eliminate negative externalities? |
| increase the money supply | What will the Fed do to the money supply to reduce unemployment? |
| decrease the money supply | What will the Fed do to the money supply to reduce inflation? |
| increase the money supply, lower reserve requirements, lower discount rate | 3 things the Fed can do to combat unemployment |
| decrease the money supply, increase reserve requirement, increase discount rate | 3 things the Fed can do to combat inflation |
| increase government spending, lower taxes | 2 things the President and Congress can do to combat inflation that constitute "fiscal policy" |
| decrease government spending, raise taxes | 2 things the President and Congress can do to combat unemployment that constitute "fiscal policy" |
| fiscal policy is undermined by crowding out and crowding in | Why, according to Monetarists, is monetary policy more effective at combating inflation than fiscal policy? |
| market forces do not guarantee full employment, except in the long run | Why, aaccording to Keynesian theorists, is fiscal policy more effective at combating unemployment than monetary policy? |
| proportional income tax | an income tax that everyone pays at the same rate, whatever the income level |
| progressive income tax | an income tax whose rate increases as income level rises |
| regressive income tax | an income tax whose rate decreases as income level rises |
Combine with other sets
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