Chapter 10

Question 1

Okum’s Law

Answer 1

the negative relationshipo between unemployment and real GDP, according to which a decrease in unemployment of 1 percentage point is associated with additional growth in real GDP of approximately 2 percent.

Question 2

Leading indicators

Answer 2

Economic variables that fluctuate in advance of the economy’s output and thus signal the direction of economic fluctuations.

Question 3

Aggregate demand

Answer 3

the negative relationship between the price level and the aggregate quantity of outpu demanded that arises from the interaction between the goods market and the money market.

Question 4

Aggregate supply

Answer 4

the relationship between the price level and the aggregate quantity of output firms produce.

Question 5

Shocks

Answer 5

An exogenous change in and economic relationship, such as the aggregate demand and aggregate supply curve.

Question 6

Demand shocks

Answer 6

Exogenous events that shift the aggregate demand curve.

Question 7

Supply shocks

Answer 7

Exogenous events that shift the aggregate supply curve.

Question 8

Stabilization policy

Answer 8

Public policy aimed at reducing the severity of short-run economic fluctuations.