Chapter 28 - Aggregate Supply and the Equilibrium Price Level

Question 1

aggregate supply

Answer 1

The total supply of all goods and services in an economy.

Question 2

aggregate supply (AS)
curve

Answer 2

A graph that shows the relationship between the aggregate quantity of output supplied by all firms in an economy and the overall
price level.

Question 3

cost shock, or supply shock

Answer 3

A change in costs that shifts the short-run aggregate supply (AS) curve.

Question 4

equilibrium price level

Answer 4

The price level at which the aggregate demand and aggregate supply curves intersect.

Question 5

potential output, or potential GDP

Answer 5

The level of aggregate output that can be sustained in the long run without inflation.

Question 6

demand-pull inflation

Answer 6

Inflation that is initiated by an increase in aggregate demand.

Question 7

cost-push, or supply-side, inflation

Answer 7

Inflation caused by an increase in costs.

Question 8

stagflation

Answer 8

Occurs when output is falling at the same time that prices are rising.

Question 9

inflation targeting

Answer 9

When a monetary authority chooses its interest rate values with the aim of keeping the inflation rate within some specified band over some specified horizon.