Term
| quantity of real GDP supplied |
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Definition
| total quantity of goods and services, valued in constant base year (2005) dollars, that firms plan to produce during a given period. |
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Term
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Definition
| relationship between the quantity of real GDP supplied and the price level. Different in long run and short run. |
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Term
| Long-run aggregate supply |
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Definition
| Relationship between the quantity of real GDP supplied and the price level when the money wage rate changes in step with the price level to maintain full employment. The quantity of real GDP supplied at full employment equals potential GDP and this quantity is the same regardless of the price level. |
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Term
| Short-run aggregate supply |
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Definition
| Relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources and potential GDP remain constant. |
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Term
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Definition
| the relationship between the quantity of real GDP demanded and the price level. |
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Term
| Why aggregate demand curve slopes down |
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Definition
| Wealth effect and substitution effect |
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Term
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Definition
| when the price level rises but other things remain the same, real wealth decreases. |
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Term
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Definition
| When the price level rises and other things remain the same, interest rates rise. |
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Term
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Definition
| the government's attempt to influence the economy by setting and changing taxes, making transfer payments, and purchasing goods and services. |
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Term
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Definition
| aggregate income minus taxes plus transfer payments |
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Term
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Definition
| the Fed's attempt to influence the economy by changing interest rates and the quantity of money is called monetary policy. |
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Term
| short-run macroeconomic equilibrium |
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Definition
| occurs when the quantity of real GDP demanded quails of the quantity of real GDP supplied. |
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Term
| long-run macroeconomic equilibrium |
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Definition
| occurs when real GDP equals potential GDP - equivalently, when the economy is on its LAS curve. |
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Term
| above full-employment equilibrium |
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Definition
| an equilibrium in which real GDP exceeds potential GDP. |
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Term
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Definition
| gap between real GDP and potential GDP |
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Term
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Definition
| When real GDP exceeds potential GDP, the output gap is called an inflationary gap. |
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Term
| full-employment equilibrium |
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Definition
| real GDP equals potential GDP |
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Term
| below full-employment equilibrium |
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Definition
| equilibrium in which potential GDP exceeds real GDP. |
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Term
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Definition
| the output gap when potential GDP exceeds real GDP |
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Term
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Definition
| A combination of recession and inflation. mid 1970s and early 1980s |
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Term
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Definition
| Believes that the economy is self-regulating and always at full employment. The term "classical" derives from the name of the founding school of economics that includes Adam Smith, DAvid Ricardo, and John Stuart Mill. |
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Term
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Definition
| Business cycle fluctuations are the efficient responses of a well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change. |
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Term
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Definition
| Believes that left alone, the economy would rarely operate at full employment and that to achieve and maintain full employment, active help from fiscal policy and momentary policy is required. |
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Term
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Definition
| Holds not only that the money wage rate is sticky, but also that prices of goods and services are sticky. |
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