question
Aggregate demand
answer
A schedule or curve that shows the amount of a nation's output (real GDP) that buyers collectively desire to purchase at each possible price level.
question
AD-AS model
answer
The macroeconomics model developed by John Maynard Keynes that assumes completely inflexible prices, thereby forcing the economy to adjust toward an equilibrium real domestic output by a process in which firms, reacting to unexpected changes in inventory levels, adjust the volume of output until the aggregate expenditures made on final goods and final services just equal the amount of output being produced in the economy.
question
real-balances effect
answer
The tendency for increases in the price level to lower the real value (or purchasing power) of financial assets with fixed money value and, as a result, to reduce total spending and real output
question
interest-rate effect
answer
The tendency for increases in the price level to increase the demand for money, raise interest rates, and, as a result, reduce total spending and real output in the economy (and the reverse for price-level decreases).
question
foreign purchases effect
answer
...
question
determinants of aggregate demand
answer
Factors such as input prices, productivity, and the legal-institutional environment that, if they change, shift the aggregate supply curve.
question
aggregate supply
answer
A schedule or curve showing the total quantity of goods and services that would be supplied (produced) at various price levels.
question
immediate-short-run aggregate supply curve
answer
An aggregate supply curve for which real output, but not the price level, changes when the aggregate demand curve shifts; a horizontal aggregate supply curve that implies an inflexible price level.
question
short-run aggregate supply curve
answer
An aggregate supply curve relevant to a time period in which input prices (particularly nominal wages) do not change in response to changes in the price level.
question
long-run aggregate supply curve
answer
An aggregate supply curve associated with a time period in which input prices (especially nominal wages) are fully responsive to changes in the price level.
question
determinants of aggregate supply
answer
...
question
productivity
answer
A measure of average output or real output per unit of input. It increases in productivity reduce costs and decreases in productivity increase costs.
Total output / total inputs =
Per-unit production cost = total input cost / total output
Total output / total inputs =
Per-unit production cost = total input cost / total output
question
equilibrium price level
answer
In the aggregate demand-aggregate supply (AD-AS) model, the price level at which aggregate demand equals aggregate supply; the price level at which the aggregate demand curve intersects the aggregate supply curve.
question
equilibrium real output
answer
The gross domestic product at which the total quantity of final goods and final services purchased (aggregate expenditures) is equal to the total quantity of final goods services produced (the real domestic output); the real domestic output at which the aggregate demand curve intersects the aggregate supply curve.
question
menu costs
answer
The reluctance of firms to cut prices during recessions (that they think will be short-lived) because of the costs of altering and communicating their price reductions; named after the cost associated with printing new menus at restaurants.
question
Three types of supply curve
answer
Long run, short run, and immediate short run
question
Decreases in AD: Recession
answer
Prices are downwardly inflexible due to fear of price wars, menu costs, wage contracts, efficiency wages, and minimum wage law
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
