Chapter 23 Flashcards Preview

Principles of Economics > Chapter 23 > Flashcards

Flashcards in Chapter 23 Deck (11):
1

aggregate demand (AD) curve

Downward sloping curve because buyers tend to purchase more of all goods and services as price levels decrease. Thus, AD is simply the
summation of all spending in the economy—the total of consumption, investment, government, and net export spending.

2

Aggregate demand

progressive tax

3

aggregate quantity demanded

Movement along the aggregate demand (AD) curve is referred to as a change in aggregate quantity demanded.

4

Aggregate supply

Represents the relationship between the price level and the quantity of all goods and services sellers are willing and able to provide during a given period of time. The AS curve can have one of two general shapes depending on the time frame of analysis: the long-run aggregate curve is vertical, and the short-run aggregate supply curve is upward sloping.

5

aggregate quantity supplied

Movement along the aggregate supply (AS) curve is referred to as a change in aggregate quantity supplied.

6

laissez-faire policy

Non-interference.

7

menu costs

Category of costs of inflation to a society. They are the costs of changing published prices.

8

Short-run macroeconomic equilibrium

Occurs at the intersection of the short-run aggregate supply (SRAS) and aggregate supply (AD) curves. This is the point at which the quantity of real gross domestic product (GDP) demanded equals the quantity of real GDP supplied at a common price level.

9

Long-run macroeconomic equilibrium

Occurs where the long-run aggregate supply (LRAS) intersects AD1. At this point, the real gross domestic product (GDP) demanded equals the aggregate demand (AD) curve and the natural level of real GDP.

10

macroeconomic surplus

In terms of demand shifts and recessionary gaps, a macroeconomic surplus is created at the original price level, P1; prices begin to fall and the
economy begins to move to a new short-run equilibrium at P2 and real gross domestic product (GDP)2 (Rgross domestic product (GDP)2).

11

macroeconomic shortage

In terms of demand shifts and recessionary gaps, a macroeconomic shortage is created at the original price level, P1; prices begin to rise and the economy begins to move to a new short-run equilibrium at P2 and real gross domestic product (GDP)2 (Rgross domestic product (GDP)2).