Download Production and Monetary Flows

Production and Monetary Flows
Use Page 217-218 to fill in the blanks below:
Aggregate demand (AD) is the total demand for all goods and services produced in a society. The
aggregate demand schedule displays the total amount of goods services purchased at each price level. The
aggregate demand curve looks very similar to the market demand curve studied in microeconomics—as
price levels rise, the total real output (or aggregate quantity demanded) falls.
Finally, it should be pointed out that the aggregate demand at each of the price levels is really equivalent to
the GDP that would occur at that price level, or the sum of all consumption, investment, government
spending, and net exports in the economy.
Aggregate supply (AS) is the total supply of all goods and services produced in a society. The aggregate
supply curve displays the total amount of goods and services that would be supplied at each price level.
Use Page 226-227 to answer the below:
Define leakages:
Any uses of income that cause money to be taken out of the income-expenditure stream of the economy.
What are the three leakages that can occur in the economy?
________________________
__________________
__________________
Define injection:
What are the three leakages that can occur in the economy?
________________________
__________________
__________________
What does the relationship among the three leakages and three injections determine?
Use Page 230-233 to answer the below:
Define below:
Fiscal Policy:
Expansionary Fiscal Policy:
Contractionary Fiscal Policy:
Tools of Fiscal Policy
If the government wants to ______________________________ the economy, it can increase general
spending in all areas of its normal budgetary
programs______________________________________________________________________________
______________________________________________ and so on. It can also undertake infrastructure
programs.
___________________________________________ is the underlying economic foundation of goods and
services that allows a society to operate. These programs might include the
______________________________________________________________________________________
________________________________________________, such as the laying of fibre-optic cable. The
added advantage of spending in these areas is that they add to the stock of capital goods and, therefore,
promote the ________________________ shift of the production possibilities curve in the future.
To restrain or stimulate economic activity, the government can also change the amount of tax it collects. It
had a number of options: It could:
• raise or lower _________________________________________________ income taxes and/or
___________________________________________________ taxes,
• alter tax ______________________________________ or tax credits,*
• provide special tax ___________________________________________for investment, such as larger
capital cost allowances on new buildings and equipment
Define automatic stabilizers:
Example of an automatic stabilizer:
Use Page 237-240 to answer the below:
Drawbacks and Limitations of Fiscal Policy (Identify and Explain each)