Term
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Definition
| schedule or curve that shows the amounts of RGDP (output) that buyers collectively desire to purchase at each possible price level. |
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Term
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Definition
| schedule or curve that shows the amounts of RGDP (output) that buyers collectively desire to purchase at each possible price level. |
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Term
| Makes Aggregate Demand downward sloping |
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Definition
Real- Balances Effect
Interest Rate
Foreign Purchases Effect |
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Term
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Definition
| The value of assets decreases, therefore consumption spending decreases |
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Term
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Definition
• Higher price level increases the demand for money
• So a lower price level means interest rates decrease |
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Term
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Definition
| rise in price of U.S goods reduces the foreign demand for goods there by reducing net exports |
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Term
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Definition
| is the idea that an initial amount of spending (usually by the government) leads to increased consumption spending and so results in an increase in national income greater than the initial amount of spending |
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Term
| Determinantes of AD shifts |
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Definition
Change in consumer spending
Change in investment spending
Change in government spending
Change in net exports spending |
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Term
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Definition
Consumer Wealth
Consumer Expectations
Household borrowing
Taxes |
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Term
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Definition
interest rates
expected returns |
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Term
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Definition
expected future business conditions
technology
degree of excess capacity
business taxes |
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Term
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Definition
national income abroad
exchange rates |
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Term
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Definition
| schedule or curve showing the relationship between the price level and the amount of real domestic output that firms in the economy produce |
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Term
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Definition
immediate short run
short run
long run |
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Term
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Definition
| both input and output prices are fixed |
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Term
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Definition
input prices are fixed but output prices can vary
horizontal line (immediate)
upward sloping (regular) |
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Term
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Definition
input prices as well as out put prices can vary
(vertical) |
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Term
| per- unit production cost |
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Definition
| total input cost/ total output |
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Term
| Determinants of Aggregate Supply |
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Definition
Change in input prices
Changes in productivity
Changes in legal environment |
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Term
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Definition
Domestic resource prices
Prices of imported resources |
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Term
| legal institutional environment |
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Definition
Business taxes and subsides
Government regulations |
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Term
| Price level tends to be inflexible in a downward direction causing real output to take the brunt of declines in AD due to: |
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Definition
Fear of price wars
Menu costs
wage contracts
morale, effort, and productivity
minimum wage |
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Term
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Definition
| if one retailer lowers prices fears that competition will reduce their prices even further |
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Term
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Definition
| if firms think that recession will be short lived they are less likely to reduce their prices (cost of printing new menus is higher than the benifits) |
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Term
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Definition
| firms rarely profit from cutting their product prices if they cannot also cut their wage rates |
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Term
| moral, effort, and productivity |
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Definition
| wage inflexibility downward is reinforced by the reluctance of many employers to reduce wage rates |
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Term
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Definition
| wages that elicit maximum work effort and thus minimize labor costs per unit of output |
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Term
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Definition
| legal floor under the wages of least-skilled workers |
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