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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
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
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 graph of the total quantity of goods and services produced at
each possible price level.Aggregate Supply Curve
This is calculated by pricing several hundred items in a market
basket and is used to compare real price levels.
CPI
DOUBLE JEOPARDY!Final Jeopardy!
Supply Hodge Podge
Labor Alex Trab-economics
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1000 1000 1000 1000
This term is defined as a situation in which neither consumers nor
firms have any incentive to change their behavior.
Equilibrium
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
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
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 Murray-cessionary Gap