chapter 21 Flashcards
(29 cards)
what two macroeconomic outcomes do AD-AS framework focus on
- The quantity of output produced across the
whole economy. - The price of that output.
what is the Aggregate demand curve
represents the total quantity of goods and services that an economy/buyers is willing to purchase at different price levels.
is the aggregate demand curve upward or downward sloping
downward sloping
what is the Aggregate supply curve
represents the total quantity of goods and services that all producers in an economy are willing and able to supply at different price levels.
is the aggregate supply curve upward or downward sloping
upward sloping
what is the equilibrium
The only point where the
quantity of output demanded is
equal to the quantity supplied.
what is aggregate expenditure
the total amount of goods and services that people want to buy across the whole economy.
why is the aggregate demand curve downward sloping
The aggregate demand curve shows that a
higher price level ultimately leads buyers to
demand a lower quantity of output.
what causes a movement along the aggregate demand curve.
Changes in the price level
what causes the aggregate demand curve to shift.
Any other factor (other than a change in price level) that causes consumers, investors, the government, or foreigners to change their spending plans.
how do higher prices affect the aggregate demand curve
➢ lead the Fed to raise the real interest rate,
➢ reducing the quantity of output
demanded.
having there be a upward movement along the demand curve
how do lower prices affect the aggregate demand curve
➢ lead the Fed to cut the real interest rate,
➢ raising the quantity of output
demanded.
having there be a downward movement along the demand curve
An increase in aggregate expenditure
at any price level causes the aggregate
demand curve to BLANK.
- shift to the right
A decrease in aggregate expenditure
at any price level causes the aggregate
demand curve to BLANK.
- shift to the left
Why is the aggregate supply upward-sloping
higher output leads to a higher price level
Lower output leads to lower prices.
BLANK causes a movement along the aggregate supply curve
Changes in the price level
BLANK cause the aggregate supply curve to shift
Changes in production costs
Changes in production costs can be caused by shifts in
- Input prices
- Import prices
- Productivity
- The exchange rate
A fall in production costs causes
the aggregate supply curve to
BLANK
shift down to the right.
A rise in production costs causes
the aggregate supply curve to
BLANK.
shift up to the left
what is Stagflation
the combination of declining GDP (economic stagnation) and rising prices (inflation)
If the prices of your inputs rise what happens to the aggregate supply
aggregate supply shifts up to the left
When U.S. consumers pay higher prices for imported cars, clothes, etc what happens to the aggregate supply
Aggregate supply shifts up to the left
If the prices of your inputs drop what happens to the aggregate supply
aggregate supply shifts down to the right
