Aggregate demand and supply Flashcards
(17 cards)
What is Aggregate Demand?
The total quantity of goods and services demanded in an economy at different price levels in a given period of time.
What are General price levels (GPL)?
The general price level of goods and services in the economy
What is Real GDP?
The total amount of output/goods & services produced in the economy in a given time
What is Aggregate Supply?
Total quantity of aggregate output/real GDP produced in an economy at different possible price levels, ceteris paribus
What is the Short Run (macro)?
The time period where the prices of factors of production remain relatively constant
What is Short Run Aggregate Supply (SRAS)?
Total quantity of aggregate output/real GDP produced in an economy at different possible price levels when the prices of factors of production remain relatively constant
What is Aggregate equilibrium?
Where AD = SRAS, where a consistent level of GDP is achieved and a constant level of output is produced in the economy
What is Maximum productive capacity?
The potential output of the economy; the maximum output that can be produced when all resources are utilized
What is Full employment level of output?
The level of unemployment that occurs (also known as the natural rate of unemployment) when the economy is producing at its maximum productive capacity
What is the Long Run?
The time period where the price of factors of production are fully flexible. This is a key assumption of the Monetarist/Neoclassical point of view.
What is Long Run Aggregate Supply (LRAS)?
The LRAS represents the maximum productive capacity of the economy, the level of output that can be produced in an economy in the long run when factor prices are fully flexible
What is the Keynesian Model?
Assumes that wages and prices are sticky even in the long run
What is Marginal Propensity to Consume (MPC)?
The fraction of income spent on consumption for every extra dollar of income earned
What is Marginal Propensity to Withdraw (MPW)?
The fraction of ‘leakages’ for every extra dollar of income earned
What is Marginal Propensity to Save (MPS)?
The fraction of savings for every extra dollar of income earned
What is Marginal Propensity to Tax (MPT)?
The fraction of taxation paid for every extra dollar of income earned
What is Marginal Propensity to Import (MPM)?
The fraction spent on imports for every extra dollar of income earned
