Studied by 1 personreduction of foreign demand
The ________ shifts the AD to the left, and creates a new equilibrium point.
Business cycle
Is the pattern experienced by the economy.
Short- run Aggregate Supply
Before wages and other resource prices have adjusted to macroeconomic conditions.
price level
When ________ rises, aggregate demand decreases and vise versa.
wealth effect
When households begin to spend more and gain less, this decreases aggregate demand.
Stagflation
Is consistent high inflation paired with high unemployment and stagnant demand in a country’s economy.
Consumer Confidence
is a statistical measure of consumers feelings about current and future economic problems, and is used as indicator of the overall state of the economy.
Peak
end of expansion and the beginning of contraction.
Trough
The end of contraction and the beginning of expansion.
Contraction
A sustained decline in economic activity.
Equilibrium Quantity
The amount of output that results in no shortage or surplus; the amount of goods and services bought and sold in the economy.
LRAS
is vertical due to the amount supplied in the long run which does not depend on the price level.
Economic growth
Is an increase in the production of goods and services in an economy.
Unemployment
since less production means less demand for labor.
Supply shock
An unexpected change in short- run or long- run aggregate supply.
Aggregate demand
Is affected by many factors, however, it can all be categorized in groups.
Foreign Purchaser effect
When price level rises, on reason aggregate demand declines is due to foreign demand decreasing.
Expansion
A sustained improvement in economic activity.
aggregate supply
In the short run, ________ is unaffected as a change in price level is not matched by a change in input costs.
LRAS
An increase in resources or technological advances shifts ________ to the right, while a reduction in resources or a decline in technological productivity shifts ________ to the left.
Aggregate demand
Is the amount of goods and services demanded by households, businesses, governments, and foreigners.
Long- Run Aggregate Supply
After wages and other resource prices have adjusted to macroeconomic conditions.
price level
A rise in ________ leads to an increase in aggregate supply.
Aggregate Supply
is the amount of all goods and services brought to market by all producers.
Aggregate supply
Is measured by dollars instead of value.
Business cycle
is the pattern experienced by the economy
Contraction
a sustained decline in economic activity
Expansion
A sustained improvement in economic activity
Peak
end of expansion and the beginning of contraction
Trough
the end of contraction and the beginning of expansion
Aggregate Supply
is the amount of all goods and services brought to market by all producers
Long-Run Aggregate Supply
aggregate supply after wages and other resource prices have adjusted to macroeconomic conditions
Two shifters of LRAS
Technological advances and increase/decrease in resources
Short-run Aggregate Supply
aggregate supply before wages and other resource prices have adjusted to macroeconomic conditions
Aggregate demand
is the amount of goods and services demanded by households, businesses, governments, and foreigners
Foreign Purchaser effect
When price level rises, on reason aggregate demand declines is due to foreign demand decreasing
The wealth effect
When households begin to spend more and gain less, this decreases aggregate demand
Consumer Confidence
is a statistical measure of consumers feelings about current and future economic problems, and is used as indicator of the overall state of the economy
Foreign purchases effect
foreigners demand less when domestic prices rise because their income have not risen in tandem, and domestic consumers prefer more imports since domestic prices are up2
Wealth effect
financial wealth is destroyed when prices rise, this causes consumers to save more and spend less
Equilibrium Price Level
The price level that equates aggregate supply and aggregate demand; the average level of prices in the economy
Equilibrium Quantity
the amount of output that results in no shortage or surplus; the amount of goods and services bought and sold in the economy
Stagflation
is consistent high inflation paired with high unemployment and stagnant demand in a countrys economy
Supply shock
an unexpected change in short-run or long-run aggregate supply
Economic growth
is an increase in the production of goods and services in an economy
Increasing human capital
when labor becomes better triand and more effective
Note
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