Ch. 21 - The AD-AS Framework

Question 1

What is the Aggregate Demand Curve?

Answer 1

Shows the relationship between the price level and the total quantity of output that buyers collectively plan to purchase (downward sloping)

Question 2

What is the Aggregate Supply Curve?

Answer 2

Shows the relationship between the price level and the total quantity of output that suppliers collectively plan to produce (upward sloping)

Question 3

What is the Long-Run AS Curve?

Answer 3

The AS curve that applies to the long-run where prices have fully adjusted. Because the economy will return to producing its potential output, the curve is vertical

Question 4

What is the Very-Short-Run AS curve?

Answer 4

The AS curve that applies to the very-short-run, in which no prices have changed. Because prices are effectively fixed, this curve is horizontal

Question 5

What are sticky prices?

Answer 5

Prices that adjust sporadically and sluggishly to changes in market conditions