unit 3 vocab

Question 1

aggregate demand

Answer 1

the total demand for final goods and services in an economy at a given time

Question 2

aggregate supply

Answer 2

the total amount of goods and services in the economy available at all possible price levels

Question 3

consumption

Answer 3

using goods and services

Question 4

inflationary gap

Answer 4

when aggregate output is above potential output

Question 5

interest rate

Answer 5

Percentage of amount borrowed to be added to the amount loaned and paid back

Question 6

long run aggregate supply

Answer 6

wages and resource prices will increase as price levels increase

Question 7

macroeconomic equillibrium

Answer 7

the point where the quantity of aggregate demand equals the quantity of aggregate supply

Question 8

Marginal Propensity to Consume (MPC)

Answer 8

measures how much more individuals will spend for every additional dollar of income.

Question 9

Marginal Propensity to Save (MPS)

Answer 9

the amount by which saving changes when disposable income changes

Question 10

multiplier effect

Answer 10

initial injection into the circular flow causes a bigger final increase in real national income.