Term
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Definition
| Economy's maximum sustainable output, given the supply of resources, technology, and rules of the game; the output level when there are no surprises about price level |
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Term
| Natural rate of unemployment |
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Definition
| The unemployment rate when the economy produces its potential output |
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Term
| If price level is higher than expected, firms... |
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Definition
| increase quantity supplied beyond economy's potential output until costs surpass prices |
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Term
| If the price level turns out lower than expected, firms... |
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Definition
| produce less than economy's potential output |
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Term
| What kind of relashionship in the short run is there between actual price level and real GDP supplied |
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Definition
Direct
Higher than expected=supply above potential output and vice versa |
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Term
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Definition
| period during which some resource prices, especially for labor, are fixed by implicit or explicit agreements |
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Term
| How do expansions and recessions affect nominal wages |
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Definition
expansions raises due to labor shortage
recessions usually stays same because supply side adjustments aren't effective so Aggregate Demand must be adjusted |
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Term
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Definition
Unexpected events that affect aggregate supply, cometimes only temporarily
Beneficial=increased supply (moves LRAS and SRAS to right
Adverse=recuction in supply (shifts LRAS and SRAS to left) |
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