Economics - Aggregate supply and demand, inflation, macroeconomic policies (12)
What is aggregate supply?
The total amount of goods and services produced in an economy.
What is aggregate demand?
The total amount of goods and services demanded in an economy.
What causes inflation?
An increase in aggregate demand.
What is fiscal policy?
The use of government spending and taxation to influence the economy.
What is monetary policy?
The use of monetary policy to control the money supply.
What is expansionary fiscal policy?
An increase in government spending and a decrease in taxes to stimulate the economy.
What is contractionary fiscal policy?
A decrease in government spending and an increase in taxes to slow down the economy.
What is expansionary monetary policy?
A decrease in interest rates to stimulate borrowing and spending.
How do you increase monetary supply?
Decrease discount rate.
Printing money.
Decrease reserved required ratio.
ECB buys government bonds.
Quantitative easing (buy stocks from private companies to pour money in the economy).
How could beneficial supply shock increase?
New invention.
Technological improvement.
Increase in labor productivity.
How does adverse supply decrease?
Natural occurrences.