Chapter 11 - Aggregate Supply

Question 1

Nominal Wage

Answer 1

Wage measured in dollar amount on a paycheck

Question 2

Real Wage

Answer 2

Wage measured in terms of quantity of goods and services it can buy

Question 3

Potential Output

Answer 3

The economy’s maximum sustainable output, given the supply of resources, tech, and rules of the game.

Question 4

Natural Rate of Unemployment

Answer 4

The unemployment rate when economy produces its potential output
-when Cyclical unemployment is 0

Question 5

Short run aggregate supply curve

Answer 5

Relationship between price level and RGDP

Question 6

Short run Equilibrium

Answer 6

The PL and RGDP that occur when aggregate demand and aggregate supply intersect

Question 7

Expansionary Gap

Answer 7

The amount by which actual output in the short run exceeds the economy’s potential output

Expansionary gap results in increase price level and increased pressure for inflation
Actual output can only exceed economy’s potential in the short run

Question 8

Long Run Equilibrium

Answer 8

The PL &RGDP that occurs when
Actual PL=expected PL
RGDP supplied=potential output
RGPD supplied=RGDP demanded

Question 9

Recessionary Gap

Answer 9

The amount by which actual output in the short run falls short of the economy’s potential output.

Question 10

Long Run Aggregate Supply Curve

Answer 10

A vertical line at the economy’s potential output. Aggregate supply when there are no surprises about the price level and all resource contracts can be renegotiated.

No matter where on LRAS, real wages are same when at Equilibrium

Question 11

Supply Shocks

Answer 11

Unexpected events that affect aggregate supply

Sometimes only temporary