Card Set Information
Ricardian equivalence theorem
government deficit do not matter under some conditions.
taxation by government has no effect
Interest rate and inflation
Positively related. interest rate tracks inflation.
real interest rate
nominal interest rate minus inflation
Current acoount surplus
net factor payments
Government surplus and and current acount surplus move in opposite directions.
Rederal Reserve System
The negative of government surplus
taxes minus spending
government active role to smoth business cycles
GNP=gross national product=
# unemployed/labor force
total spending on final goods
negative govnm surplus
all incomes received within a nation
price level change during one period
sum of value of goods and services
When indiference curves are L shape?
when S and L are perfect complements to each other
The marginal product
additional unit which can be produced by one additional unit of input
Marginal product of labor declines in the sides
It increases when capital or labor increases or productivity
When firm tries to max profit..
it sets MPN equal to the real wage.
a tax that is unaffected by the actions of the cobnsumer or firm being taxed.
income up = consumption up
Marginal rate of transformation
negative slope of the PPF. Rate at which one good can be converted to another.
MRT= - slope PPF
cannot make sb better off without making another worse off
Increase in government spending does what?
shifts PPF down by amount spent. Negative effect on L and C so they both fall and unemployment rises.
the relationship between the tax revenue collected by the government and the tax rate
Current income up = C up = C' up = S up
Future income up = C up =C' up.
R increase does...
reduction of prices in the future. so consumption less today, more in the future
taxes change does not affect consumers consumption
Real interest rate
return on savings in units of consumption goods.