Chapter 33

Question 1

The business cycle

Answer 1

Short-run economic fluctuations

Question 2

Stagflation

Answer 2

A period of falling output and rising prices

Question 3

Accommodative policy

Answer 3

A policy of increasing aggregate demand in response to a decrease in short-run aggregate supply

Question 4

Menu costs

Answer 4

Costs associated with changing prices

Question 5

Aggregate supply curve

Answer 5

A curve that shows the quantity of goods and services that firms are willing to produce at each price level

Question 6

Aggregate-demand curve

Answer 6

A curve that shows the quantity of goods and services that households, firms, the government, and customers abroad are willing to buy at each price level

Question 7

Model aggregate demand and aggregate supply

Answer 7

The model most economists use to explain short-run fluctuations in the economy around its long-run trend

Question 8

Recession

Answer 8

A period of mildly falling incomes and rising unemployment

Question 9

Depression

Answer 9

A period of unusual severe falling incomes and rising unemployment

Question 10

Natural rate of output

Answer 10

The production of goods and services that an economy achieves in the long run when unemployment is at its natural and normal rate