Chapter 13

Question 1

aggregate demand and aggregate supply model

Answer 1

a model that explains short-run fluctuations in real GDP and the price level

Question 2

aggregate demand curve

Answer 2

a curve that shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government

Question 3

short run aggregate supply (SRAS)

Answer 3

a curve that shows the relationship in the short run between the price level and the quantity of real GDP supplied by firms

Question 4

monetary policy

Answer 4

the actions the federal reserve takes to manage the money supply and interest rates to achieve macroeconomic policy objectives

Question 5

fiscal policy

Answer 5

changes in federal taxes and purchases that are intended to achieve macroeconomic policy objectives

Question 6

TABLE 13.1

Answer 6

TABLE 13.1

Question 7

long-run aggregate supply (LRAS) curve

Answer 7

a curve that shows the relationship in the long run between the price level and the quantity of real GDP supplied

Question 8

menu costs

Answer 8

the costs to firms of changing prices

Question 9

supply shock

Answer 9

an unexpected event that causes the short run aggregate supply curve to shift

Question 10

TABLE 13.2

Answer 10

TABLE 13.2

Question 11

stagflation

Answer 11

a combination of inflation and recession, usually resulting from a supply shock