Chapter 33: Aggregate Demand and Aggregate Supply

Question 1

Recession

Answer 1

A period of mildly falling incomes and rising unemployment

Question 2

Depression

Answer 2

A period of unusually severe falling incomes and rising unemployment

Question 3

The business cycle

Answer 3

Short-run economic fluctuations

Question 4

Model of aggregate demand and aggregate supply

Answer 4

The model most economists use to explain short-run fluctuations in the economy around its long-run trend

Question 5

Aggregate-demand curve

Answer 5

A curve that shows the quantity of goods and services that households, firms, the government, and customers abroad are willing to buy at each price level

Question 6

Aggregate-supply curve

Answer 6

A curve that shows the quantity of goods and services that firms are willing to produce at each price level

Question 7

Natural rate of output

Answer 7

The production of goods and services that an economy achieves in the long run when unemployment is at its natural or normal rate

Question 8

Menu costs

Answer 8

Costs associated with changing prices

Question 9

Stagflation

Answer 9

A period of falling output and rising prices

Question 10

Accommodative policy

Answer 10

A policy of increasing aggregate demand in response to a decrease in short-run aggregate supply