Macroeconomics Test 2 - Ch. 9

Equilibrium Condition:
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Terms in this set (25)
recessionary gapthe amount by which the equilibrium GDP falls short of potential GDPUnder the recessionary gap, there is ____ in the economycyclical unemploymenthigh unemployment =lower wages and lower pricesinflationary gapthe amount by which the equilibrium GDP exceeds the potential GDPUnder an inflationary gap, the economy faces....the pressure of inflationlow unemployment =higher wages and higher pricesautonomous expenditurespending independent of income (Y)Expenditure Multiplierchange in Y/ change in autonomous expenditure variableThe final change in income (GDP) will be ____ than the initial change in autonomous expenditure variablegreaterSomeone's spending is someone else's ____incomeAn autonomous change in spending lead to a _____ shift of the aggregate demand curve by an amount given by the simple expenditure modelhorizontalSimple Expenditure Multiplier:m^e=1/(1-b)____, ____, ____are fixed and imports do not depend on ____price level; taxes; imports; incomeInternational trade ____ the value of the multiplier and therefore it helps to ____ the domestic economy in the face of an aggregate demand shocklowers; stabilizeThe ____ the multiplier, the better because it implies a more stable economysmaller