Chapter 33 - Aggregate Demand and Aggregate Supply

Real GDP

Real GDP

________ is commonly used to watch short- run changes in the economy.

stickiness of wages

The ________ provides an incentive to produce less output (when the price level is lower) and more output (when the price level is higher)

Stagflation

________: a period of falling outputs and rising prices.

Technology

________ and monetary policy are the two most important influencers of the economy in practice.

Policymakers

________ who can influence aggregate demand can navigate the adverse impact on output but only at the cost of making inflation worse.

available technology

(In the long run): the real GDP depends on supplies of labor, capital, and natural resources and on the ________ used to produce goods and services.

larger quantity of goods

The increase in consumer spending relates to a(n) ________ and services demanded.

Misperceptions Theory

The ________: Changes in the overall price level can mislead suppliers about what actually occurs in certain markets where their products are sold.

final goods

It measures the value of all ________ and services produced within a given period of time and measures the total income of everyone in the economy.

Price Level

The ________ and Net Exports (The Exchange- Rate Effect): When a fall in the US ________ causes US interest rates to fall, the real value of the dollar declines in foreign exchange markets.

Stagnation

________: falling output.

Pessimism

________ about the future leads to falling incomes and rising unemployment.

Money itself

________ is insignificant, but the effect that it has on everyone is The Reality of Short- Run Fluctuations.

Technological Knowledge

Shifts Arising from ________: Better technology means more supplies produced.

unemployment rate

The ________ is never 0 33- 2 Explaining Short- Run Economic Fluctuations The Assumptions of Classical Economics.

Recession

________: a period of declining real incomes and rising unemployment.

Depression

________: a severe recession.

Quantity of output

________ supplied depends on the three theories: the sticky wage theory, the sticky price theory, and the misperceptions theory.

Firms

________ produce a smaller amount of output.

Shifts

________ Arising from Changes in Capital: An increase in capital stock increase productivity and supplies.

Sticky Wage Theory

________: Wages are slow to change when economic conditions change.

model of aggregate demand

The ________ and aggregate supply is commonly used among economists to explain short- run fluctuations.

natural resources

Shifts in the long- run aggregate supply curve arise from changes in labor, capital, ________, or technological knowledge.

Higher costs

________ lead to higher wages which mean higher prices, leading to a wage- price spiral.

short run fluctuations

The ________ in output and the price level can be viewed as deviations from the long- run trends of output growth and inflation.