Ch 16 - Macroeconomic Equilibrium 

________ creates inflation (P1- P2), so wages increase to match this inflation.

________: supply- side policies are very important as they do not create actual and potential economic growth, but also decrease inflation.

________ can increase along the short run AS curve by having workers work overtime (short- term solution)

________: during a recession, supply- side policies may increase productive potential however no actual growth occurs.

The economy is in ________ when aggregate demand equals aggregate supply.

________: government attempts to increase productivity and efficiency in the economy.

________: where the economy would be in equilibrium at a level of output that is less than the full employment level of output.

________ in price level means that the prices of the factors of production have ________.

________: the point which demand is equal to supply.

When ________ is equal to aggregate supply, there us no upwards /downwards pressure on the price level.

equilibrium could operate in the short run equilibrium at below their potential output

the economy could return to its maximum potential output (equilibrium would be at AD + LRAS)

supply-side policies are very important as they do not create actual and potential economic growth, but also decrease inflation