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Flashcards in Chapter 10 Deck (10)
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0
Q

Long – run aggregate supply curve

A

A vertical line representing the real output of goods and services after full adjustment has occurred. It can also be viewed as representing the real GDP of the economy under conditions of full employment – the full – employment level of real GDP

1
Q

Aggregate supply

A

The total of all planned production for the economy

2
Q

Base – year dollars

A

The value of a current some expressed in terms of prices in a base year

3
Q

Endowments

A

The various resources in an economy, including both physical resources and such human resources as ingenuity and management skills

4
Q

Aggregate demand

A

The total of all planned expenditures in the entire economy

5
Q

Aggregate demand curve

A

A curve showing planned purchase rates for all final goods and services in the economy at various price levels, all other things held constant

6
Q

Real – balance effect

A

The change in expenditures resulting from a change in the real value of money balances when the price value changes, all other things held constant; also called the wealthy effect

7
Q

Interest rate effect

A

One of the reasons that the aggregate demand curve slopes downward: higher price levels increase the interest rate, which in turn causes businesses and consumers to reduce desired spending due to the higher cost of borrowing

8
Q

Open economy effect

A

One of the reasons that the aggregate demand curve slopes downward: higher price levels results in foreign residents desiring to buy fewer US made goods, while US residents now desire more foreign – made goods, thereby reducing net exports. This is equivalent to reduction in the amount of real goods and services purchased in United States

9
Q

Secular deflation

A

A persistent decline in prices resulting from economic growth in the presence of stable aggregate demand