Chapter 10 – Aggregate Demand And Aggregate Supply Flashcards
Aggregate demand
A schedule or curve that shows the total quantity of goods and services demanded a different price levels
Aggregate demand – aggregate supply model
The macro economic model that uses aggregate demand and aggregate supply to explain price level and real domestic output
Real balances effect
The inverse relationship between the price level and the real value of financial assets with fixed money value
Interest rate effect
The direct relationship between price level and the demand for money, which affects interest rates, and, as a result, total spending in the economy
Foreign trade effect
The inverse relationship between the net exports of an economy and its price of all relative to price level in the economies of trading partners
Determinants of aggregate demand
Factors such as consumption spending, investment, government spending, and net exports that shift the aggregate demand curve
Aggregate supply
A schedule or curve that shows the total quantity of goods and services supplied a different price levels
Immediate short run aggregate supply curve
And aggregate supply curve for which real output, but not the price level, changes when the aggregate demand curve shifts.
Short run aggregate supply curve
And aggregate supply curve for which real open it, but not the price level, changes when the aggregate demand curve shifts
Long-run aggregate supply curve
The aggregate supply curve associated with the time period in which input prices especially nominal wages are fully responsive to changes in the price level
Determinants of aggregate supply
Factors such as input prices, productivity, and the legal institutional environment that shift the aggregate supply curve.
Equilibrium price level
The price level at which the aggregate demand curve intersects the aggregate supply curve
Equilibrium real domestic output
The real domestic output at which the aggregate demand curve intersects the aggregate supply curve
Inflationary gap
The amount by which equilibrium GDP exceeds potential GDP
Positive GDP gap
A situation in which actual gross domestic product exceeds potential output
