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full employment
When the economy is producing below ________ or potential output, the process works in reverse.
business cycle
Political ________:** The effect on the economy of using monetary or fiscal policy to stimulate the economy before an election to improve reelection prospects.
Keynes
________ argued that there could be situations in which total demand fell short of total production in the economy for extended periods of time.
Liquidity trap
________:** A situation in which nominal interest rates are so low, they can no longer fall; also known as the zero lower bound.
Tax cuts
________ initially will increase consumer spending and lead to a higher level of GDP.
Lower interest rates
________ stimulate investment spending and push the economy back toward full employment.
GDP
Wages and prices will all tend to increase together during booms when ________ exceeds its full- employment level or potential output.
interest rate
The increase in government spending has no long- run effect on the level of output, only on the ________.
neutrality of money
Long- run ________:** A change in the supply of money has no effect on real interest rates, investment, or output in the long run.
GDP
Wages and prices will fall together during periods of recessions when ________ falls below full employment or potential output.
full employment
Prices are lower and output returns to ________.
full employment
If output exceeds ________, prices will rise and output will fall back to ________.
Note
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