* The four main agents in the macroeconomy are:
* Supply land, labor, and capital to business
* Purchase consumer goods and services (C)
* Pay Taxes
* Use the factors supplied by the households to produce the nation’s output * Purchase investment goods (I)
* Purchase governments goods and services(G)
* Collect taxes(T)
* Purchase exports (EX)
* Supply imports (IM)
* All income generated in the economy accrues to households since they supply all of the factor inputs.
* Intermediate goods are purchased by one business from another to use in production.
* Aggregate Demand is the curve with a negative slope.
* Aggregate Supply is the curve with the positive slope.
* The shape of the AS curve is designed to call attention to three regions of GDP: * The horizontal part shows that the economy is operating below full employment. Increase in production can be relatively easily achieved without causing shortages of inputs or increases in prices. * The middle part shows symbolizes the range of GDP where inputs begin to become scarce. * The vertical part shows the economy at full employment and no more output is possible until a new worker enters the labor force or new factories/machines are built. This is the absolute limit to production. * It is possible to exceed it for a short period of time, but only for this brief period.
* The Multiplier Effect is an increase in aggregate demand. For any given increase in spending that is not directly caused by an increase in come, the impact on equilibrium GDP is greater than the initial spending increase.
* Fiscal policy includes government taxation and expenditures * When governments increase spending, the increase ripples through the economy. * A decrease in...
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