Chap 11 Flashcards
the amount of total spending on domestic goods and services in an economy
aggregate demand (AD)
the total spending on domestic goods and services at each price level
aggregate demand (AD) curve
a model that shows what determines total supply or total demand for the economy, and how total demand and total supply interact at the macroeconomic level
aggregate demand/aggregate supply model
the total quantity of output firms will produce and sell
aggregate supply (AS)
the total quantity of output that firms will produce and sell at each price level
aggregate supply (AS) curve
another name for potential GDP, when the economy is producing at its potential and unemployment is at the natural rate of unemployment
full-employment GDP
portion of the SRAS curve where GDP is below potential but not so far below as in the Keynesian zone; the SRAS curve is upward-sloping, but not vertical in this zone
intermediate zone
portion of the SRAS curve where GDP is far below potential and the SRAS curve is flat
Keynesian zone
“demand creates its own supply”
Keynes’ law
vertical line at potential GDP showing no relationship between the price level for output and real GDP in the long run
long run aggregate supply (LRAS) curve
economists who generally emphasize the importance of aggregate supply in determining the size of the macroeconomy over the long run
neoclassical economists
portion of the SRAS curve where GDP is at or near potential output where the SRAS curve is steep
neoclassical zone
the maximum quantity that an economy can produce given full employment of its existing levels of labor, physical capital, technology, and institutions
potential GDP
“supply creates its own demand”
Say’s law
positive short run relationship between the price level for output and real GDP, holding the prices of inputs fixed
short run aggregate supply (SRAS) curve
