Chapter 8

Question 0

Long run aggregate supply (LRAS) curve

Answer 0

A vertical line representing the economy’s potential real GDP in the long run at full employment

Question 1

Long run

Answer 1

A situation in which firms are unconstrained by fixed factors and therefore can vary all their inputs and adjust fully to market conditions

Question 2

Long run macroeconomic equilibrium

Answer 2

The condition that exists when the economy’s AD curve and it’s LRAS curve intersect, which occurs at the full employment level of real GDP

Question 3

Secular decline in the price level

Answer 3

A persistent decline in the average level of prices over time

Question 4

Economic growth

Answer 4

An increase in a country’s real GDP

Question 5

Real GDP per capita

Answer 5

A measure of GDP that accounts for changes in the population

Question 6

Growth rate

Answer 6

The percentage change in a country’s real GDP per capita

Question 7

Sustainable development

Answer 7

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs

Question 8

Optimal labour force

Answer 8

The labour force that is consistent with maximum real GDP per worker