Studied by 3 peopleAggregate demand
total demand for goods and services
Aggregate supply (AS)
curve shows total value of output produces are willing + able to supply at different price levels during a certain time
Aggregate demand (AD)
total demand of goods/services
Price level
average level for all prices
Long-run aggregate supply curve (LAS)
stands at level of output that corresponds with full employment
Cost-push (supply inflation)
when inflation is due to increase in resource costs (shifts AS curve to left)
Stagflation
rising prices and falling output
Demand pull inflation
result of AD curve shifting out to the right relative to AS curve
Creeping inflation
inflation at a low rate that remains teady for a long period of time
Galloping inflation
unsteady inflation that exceeds 10% per year and grows monthly
Hyperinflation
rapid price incrase greater than 50% per year
Inflationary gap
amount the equilibrium real GDP would need to increase to reach the LAS
Spending multiplier
number the initial amount of new spending needs to be multiplied by to find total resulting increase in real GDP
Marginal propensity to consume (MPC)
amount consumption increases for every dollar of real income
Marginal propensity to save (MPS)
fraction of each dollar of income that is saved
Fiscal policy
when government tries to counteract fluctuations in aggregate expenditure by changing purchases, transfer payment, taxes
Note
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