Question

still speed studying for dual enrollment macroeconomics, and a few quick questions (answering any is helpful!):

- what is arbitrage
- what is the foreign purchases effect
- what is the misperception effect
- what are the differences of:
Aggregate supply in the long run
Aggregate supply in the short run
Aggregate supply in the immediate short run
- what is expenditure multiplier effect (and how to calculate it)
- what is multiplier effects of fiscal policy (and again, how to calculate it)
- how does automatic stablizers work
- how does crowding out effect work

(theres a lot more but here are some basic ones)

Answer 1

I can answer one of these right now but the rest I’d need to answer later. Misperception is kind of just a bias where people misinterpret something due to pre existing beliefs, sometimes a mental state, or they’re lacking in information. (Not sure if this is what you wanted or not please correct me if im wrong)

Answer 2

1. Arbitrage is a trading strategy by which profit is derived from price differentials for identical or similar asset in different markets.
2. The foreign purchases effect explains how a change in price level in a nation can influence the other nations' purchases quantity.
3. The misperception effect predicts that people may temporarily misinterpret price adjustment.
4. Long-run aggregate supply is determined by the resources and productive capacity of the economy.
5. Short-run aggregate supply can be determined by factors like input prices, such as wages and energy prices.
6. Current short-run aggregate supply is determined by expectations of future price.
7. The expenditure multiplier effect describes how a rise in spending, initially, leads to a greater level of aggregate economic activity. The formula for the expenditure multiplier effect is expenditure multiplier = 1 / (1 - MPC).
8. Consumption changes in proportion with the change in deficit. If fiscal policy changes, yet without altering the deficit, then consumption doesn't change. (same formula is used.)
9. These are the fiscal policy tools that automatically stabilize the economy in periods of recession and booms.
10. Crowding out effect occurs where the increase in government consumption or lending eats into private consumption.