Principles of Macroeconomics - Aggregate Demand and Supply

This set of flashcards covers essential vocabulary and concepts related to aggregate demand and supply from the Principles of Macroeconomics lecture.

Aggregate Demand (AD)

The total quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level.

Aggregate Supply (AS)

The total quantity of goods and services that firms choose to produce and sell at each price level.

Short Run Aggregate Supply (SRAS)

The aggregate supply curve that represents the production capacity of firms in the short run.

Long Run Aggregate Supply (LRAS)

The aggregate supply curve that represents the production capacity of firms in the long run, where all inputs and price levels are variable.

Business Cycle

The fluctuations in economic activity characterized by periods of expansion (booms) and contraction (recessions).

Recession

A period of declining real incomes and rising unemployment.

Depression

A severe and prolonged downturn in economic activity.

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy.

Investment Spending (I)

Expenditures on capital goods that will be used for future production.

Consumption (C)

Expenditures made by households on goods and services.

Net Exports (NX)

The value of a country's total exports minus the value of its total imports.

Shifters of Aggregate Demand

Factors that cause the AD curve to shift, including changes in consumption, investment, government spending, and net exports.

Correlation

A statistical measure that describes the extent to which two variables change together.

Interest Rate (r)

The cost of borrowing funds, which influences consumption and investment.

Consumer Confidence Index (CCI)

An economic indicator that measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation.

Real GDP (Y)

The total value of all final goods and services produced within a country's borders in a given year, adjusted for inflation.

Price Level (P)

The average of current prices across the entire spectrum of goods and services produced in the economy.

Wealth Effect

The change in consumer spending that results from changes in perceived wealth.

Trade Effect

The change in net exports that results from changes in the price level.

Shifters of Investment (I)

Factors that influence the level of investment spending, such as interest rates and business expectations.