Objective 2

Question 1

Aggregate Demand

Answer 1

The total measured demand for the output of an economy. The aggregate demand curve shifts on factors effecting consumption, investment, government, taxes and trade.

Question 2

Aggregate supply

Answer 2

The total measured output for the output of an economy. The aggregate demand curve shifts on factors effecting input prices, changes in productivity, legal-institutional environment, taxes, and regulation.

Question 3

Aggregate supply (short-run)

Answer 3

The range of the aggregate supply curve (upward slopping) in which output prices are flexible, but input prices and wages are sticky.

Question 4

Aggregate supply (long-run)

Answer 4

The range of the aggregate supply curve (vertical) associated with a period of time in which both input and output prices are fully flexible.
Represents the long-run sustainable output of an economy

Question 5

Recession

Answer 5

A period of declining real GDP, accompanied by lower income and higher unemployment, often for two or more consecutive quarters.

Question 6

Deflation

Answer 6

A period of declining price levels, associated with recessions and depressions.

Question 7

Stagflation

Answer 7

A period of persistent high inflation, unemployment and sluggish growth.