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Recession
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period of reduced economic activity
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Inflation
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a general increase in prices and fall in the purchasing value of money.
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Aggregate Demand (AD) curve
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shows the relationship between the total quantity of output demanded and the price level.
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Solow growth rate
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economy's potential growth rate, the rate of economic growth that would occur given flexible prices and the existing real factors of production
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nominal wage confusion
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occurs when workers respond to their nominal wage instead of to their real wage (the wage after correcting for inflation).
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fiscal policy
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Government policy that attempts to manage the economy by controlling taxing, spending and borrowing.
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Ricardian Equivalence
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occurs when people see that lower taxes today means higher taxes in the future, so instead of spending their tax cut, they save it to pay future taxes. When Ricardian equivalence holds, a tax cut doesn't increase aggregate demand even in the short run
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