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Macro Ch 20
agg supply/demand
18
Economics
Undergraduate 1
03/25/2009

Additional Economics Flashcards

 


 

Cards

Term
Aggregate Supply Curve (AS)
Definition
the curve that shows the level of Real GDP produced at different possible price levels during a time period.
Term
Keynesian Range
Definition
horizontal segment of the aggregate supply curve, which represents an economy in a severe recession
Term
Intermediate Range
Definition
rising segment of the aggregate supply curve, which represents an economy as it reaches full employment output
Term
Classical Range
Definition
vertical segment of the aggregate supply curve, which represents an economy at full employment output
Term
Stagfaltion
Definition
condition that occurs when an economy experiences the twin maladies of high unemployment and rapid inflation simultaneously
Term
John Maynard Keynes' Book
Definition

General Theory of Employment, Investment, and Money

 

Written in 1936

Term
What does "supply creates its own demand" mean and what is it called?
Definition

It means that if the products are made there will be a demand for them

 

It is called says law

Term
5 Factors of Shift in Aggregate supply
Definition

1. Resource Prices

2. Taxes

3. Technology

4. Subsidies

5. Regulation

Term
4 Causes of shift in aggregate demand
Definition

1. Consumption (C)

2. Investment (I)

3. Government Spending (G)

4. Net Exports (X-M)

Term
Why is the long run aggregate supply curve (LRAS) vertical?
Definition
result of nominal wages/salary eventually changing by the same percentage as the price level changes
Term
Short Run Aggregate Supply Curve (SRAS)
Definition
curve that shows the level of real GDP produced at different possible price levels during a time period in which nominal incomes do not change in response to changes in price level
Term
2 Reasons wages are fixed in the short run
Definition

1. Incomplete Knowledge

- workers unaware of inflation in the short run

2. Fixed Wage Contracts

Term
Long Run Aggregate Supply Curve (LRAS)
Definition
curve that shows the level of real GDP produced at differerent possible price levels during a time period in which nominal incomes change by the same percentage as the price level changes
Term
Aggregate Demand Curve
Definition
curve that shows the level of real gross domestic product purchased by households, business', govt., and foreigners (net exports), at different possible price levels during a time period
Term
Real Balances (wealth effect)
Definition
impact on total spending caused by the inverse relationship between the price level and the real value of financial assets with fixed nominal value
Term
Interest Rate Effect
Definition
impact on total spending caused by the direct relationship between the price level and interest rate
Term
Net Exports Effect
Definition
impact on total spending caused by the inverse relationship between the price level and the net exports of an economy
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