aggregate demand and supply definitions

Question 1

gross investment

Answer 1

addition to capital stock, both to replace the existing capital stock which has been used up (depreciation) and the creation of additional capital

Question 1

net investment

Answer 1

gross investment minus depreciation

Question 2

net trade balance

Answer 2

difference between amoutn of goods and services a country exports

Question 3

tariff

Answer 3

tax on imports

Question 4

aggregate supply

Answer 4

total amount producers in economy are willing and able to supply at a given price level in given time period

Question 5

short run aggregate supply

Answer 5

shows total planned output when prices in economy can change but prices and productivity of all factor inputs = constant

Question 6

long run aggregate supply

Answer 6

shows total planned output when prices and wage rates can change. measure of a countrys potential output.

Question 7

classical LRAS

Answer 7

assume in long run wages = flexible and unemployment = eliminated as real wages adjust

Question 8

Keynesian lRAS

Answer 8

in long run wages are sticky and may not fall far enough to eliminate unemployment.