ECN2801

Spring 2018 Review for Exam 2

Dr. Dao

· Real Balance Effect

· Effect of Consumption on aggregate demand

· Expectations about future prices

· Interest Rate Effect

· Effect of Income Taxes on aggregate demand

· Business Optimism

· Effect of Business Taxes on aggregate demand

· Effect of Appreciation or Depreciation on Net Exports

· Effect of Wage rates on short-run aggregate supply (SRAS)

· Effect of prices of nonlabor inputs on short-run aggregate supply (SRAS)

· Adverse Supply Shock

· Effect of Labor Productivity on short-run aggregate supply (SRAS)

· Short-run Equilibrium

· Effect of changes in Investment on aggregate demand

· Reasons for downward sloping AD curve

· Short-run vs. Long-run Aggregate Supply Curve

· Full employment real GDP

· Recessionary (Contractionary) Gap

· Inflationary (Expansionary) Gap

· Self-regulating Economy

· Classical Economics

· Laissez-faire Macroeconomic Policy

· What will happen when the economy is in a recessionary gap?

· What happens if the economy is operating at a point beyond its institutional PPF?

· Say’s Law in a money economy

· Classical View of the Credit Market

· Relationship between amount of funds firms invest and the interest rate

· Classical Position on Wages and Prices

· What Happens when Total Production is Greater than Total Expenditures?

· Two Major Curves or Lines in the TE-TP diagram

· What Happens when TE > TP? When TP > TE? When TP = TE?

· Relationship between Consumption and Disposable Income

· What Determines Savings according to Classical Economists? According to Keynes?

· Efficiency Wage Model

· Keynes’s The General Theory of Employment, Interest, and Money

· Keynes’s View on what determines Investment