CH. 5 - Aggregate Demand + Supply

Question 1

Aggregate Demand

Answer 1

Total quantity of G + S consumers, businesses, government and those outside the country buy at various price levels

Question 2

Aggregate Supply

Answer 2

Total G + S sellers are willing/able to produce at various price levels

Question 3

Business Cycles

Answer 3

Expansionary + Contractionary phases in growth rate of RGDP

Question 4

Foreign Trade Effect

Answer 4

Effect that change in prices has on X + IM

Question 5

Inflationary Gap

Answer 5

Difference b/w actual real and potential real GDP when the economy is temporarily producing ABOVE full employment

Question 6

Interest-Rate Effect

Answer 6

The effect that change in prices - interest rates - has on investment

Question 7

Long-Run Aggregate Supply

Answer 7

Relationship b/w Potential GDP + Price Level

**Vertical - independent of the Price level

Question 8

Equilibrium

Answer 8

AD = AS

Question 9

Multiplier (K)

Answer 9

Effect on income of a change in autonomous spending

Question 10

Nominal Wage

Answer 10

Present value of current wage

Question 11

Potential GDP

Answer 11

Amount economy was capable of producing when all resources fully utilized

Question 12

Real-Balance Effect

Answer 12

Effect that a change in the values of real balances has on consumption spending

Question 13

Real Wage

Answer 13

Amount of G + S an employee can buy for a given amount of nominal wage

Real Wage = Nominal Wage / Price Level

Question 14

Recession

Answer 14

When economy producing below its potential **two quarters of negative growth

Question 15

Recessionary Gap

Answer 15

Difference b/w actual real GDP and potential real GDP when economy producing BELOW its potential