macro final, define and explain

Front

The Pigou effect

Back

is the effect of the rise or fall in the price level that impacts aggregate demand (AD) by influencing real wealth.

Front

a demand-induced recession

Back

(is a typical recession) where a collapse in aggregate demand(AD) causes output, employment and prices to fall.

Front

The animal spirits of capitalists

Back

is the degree of optimism and confidence that the business community has in their future profits.

example

when :

animals spirits are high = an investment boom = high AD --> (moves right)

when:

animals spirits are low = an investment slump = low AD <-- (moves left)

Front

Overheating

Back

occurs when output expands beyond potential output, causing shortages of labor, materials and capital, leading to inflation problems.

Front

stagflation

Back

is an economic disease of the 1970's when output and employment collapsed while price inflation kept rising.

Front

adverse supply shock

Back

is when there is a shift in the nations aggregate supply curve (AS) causing it to shift to the left hence increasing price inflation and slowing the growth of output.

can be caused by:

high energy prices, rising wages, decline in productivity and supply chain disruptions

Front

commodity money

Back

is a money which has two values

1: value as commodity

(what its made from)

2: value as money

example :

commodity value: made of gold or sliver

money value : exchange for goods and services

Front

M1 and M2

Back

M1 is a narrow measure of money,

which includes:

-currency held by the non bank public (households, business (non bank) and checkable bank deposits.)

M2 is a broad measure of money,

which includes:

-currency held by the non bank public

and liquid savings accounts

(near monies)

Front

Medium of exchange

(a function of money)

Back

is where money serves as a

"go between" in trade to allow an exchange of goods and services.

ex :

sell textbook for money,

use money to buy pizza.

Front

Store of value

(a function of money)

Back

is when money serves as a convenient way to transport our purchasing power over time and space