Aggregate Demand and Supply Concepts

Flashcards covering key concepts related to Aggregate Demand and Supply for review.

Aggregate Demand (AD)

The total demand for goods and services within a particular market at a given overall price level and in a given time period.

Positive Shocks

Events that increase C (Consumption), I (Investment), G (Government spending), or Nx (Net exports) and shift the AD curve to the right.

Aggregate Demand (AD)

The total demand for goods and services within a particular market at a given overall price level and in a given time period.

Positive Shocks

Events that increase C (Consumption), I (Investment), G (Government spending), or Nx (Net exports) and shift the AD curve to the right.

Negative Shocks

Events that decrease C (Consumption), I (Investment), G (Government spending), or Nx (Net exports) and shift the AD curve to the left.

Short-Run Aggregate Supply (SRAS)

The total production of goods and services in an economy at a given overall price level in the short run.

Long-Run Aggregate Supply (LRAS)

The total production of goods and services when all inputs in the economy are variable, and prices and wages can fully adjust.

Demand-Pull Inflation

Inflation that occurs when demand for goods and services exceeds supply, causing prices to increase.

Cost-Push Inflation

Inflation that arises from increases in the cost of production or supply chain constraints, leading to higher prices.

Stagflation

A situation in which inflation and unemployment rise simultaneously, often due to negative supply shocks.

Self-Adjustment

The economy's ability to return to equilibrium over the long run without government intervention.

Shifters of AD

Factors that can cause the aggregate demand curve to shift, including consumption, investment, government spending, and net exports.

Shifters of SRAS

Factors that can cause the short-run aggregate supply curve to shift, including input prices, inflationary expectations, and technology.

Inflationary Gap

A situation where the actual level of GDP is higher than the potential or full-employment level of GDP, leading to upward pressure on prices.

Recessionary Gap

A situation where the actual level of GDP is lower than the potential level of GDP, leading to unemployment and downward pressure on prices.