Chapter 29 Flashcards
(13 cards)
AGGREGATE DEMAND
schedule or curve that shows the amount of a nation’s output that buyers collectively desire to purchase at each possible price level
REAL- BALANCES EFFECT
increases in the price level to lower the real value (or purchasing power) of financial assets with fixed money value
as a result, to reduce total spending and real output, and conversely for decreases in the price level
INTEREST-RATE EFFECT
increases in the price level to increase the demand for money, raise interest rates
as a result, reduce total spending and real output in the economy
FOREIGN- PURCHASES EFFECT
inverse relationship between the net exports of an economy and its price level relative to foreign price levels
changes in AD - non price level determinants of AD
Consumption causes
Investment causes
Government
Net Exports
AGGREGATE SUPPLY
total quantity of goods and services supplied at different price levels
IMMEDIATE SHORT RUN AGGREGATE SUPPLY CURVE
real output, but not the price level, changes when the aggregate demand curves shifts
a horizontal aggregate supply curve that implies an inflexible price level
SHORT RUN AGGREGATE SUPPLY CURVE
input prices do not change in response to changes in the price level
LONG RUN AGGREGATE SUPPLY CURVE
for which price, but not real output, changes when the demand curves shifts; a vertical supply curve that implies fully flexible prices
Changes in AS
input prices
productivity
legal institutions
EQUILIBRIUM PRICE LEVEL
the price level at which the aggregate demand curve intersects the aggregate supply curve
EQUILIBRIUM REAL OUTPUT
total quantity for final goods and services purchased is equal to the total quantity of final goods and services produced
RATCHET EFFECT
a price or wage increases as a result of temporary pressure but fails to fall back when the pressure is removed
