The ________ shifts the AD to the left, and creates a new equilibrium point.
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Business cycle
Is the pattern experienced by the economy.
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Short- run Aggregate Supply
Before wages and other resource prices have adjusted to macroeconomic conditions.
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price level
When ________ rises, aggregate demand decreases and vise versa.
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wealth effect
When households begin to spend more and gain less, this decreases aggregate demand.
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Stagflation
Is consistent high inflation paired with high unemployment and stagnant demand in a country’s economy.
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Consumer Confidence
is a statistical measure of consumers feelings about current and future economic problems, and is used as indicator of the overall state of the economy.
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Peak
end of expansion and the beginning of contraction.
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Trough
The end of contraction and the beginning of expansion.
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Contraction
A sustained decline in economic activity.
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Equilibrium Quantity
The amount of output that results in no shortage or surplus; the amount of goods and services bought and sold in the economy.
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LRAS
is vertical due to the amount supplied in the long run which does not depend on the price level.
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Economic growth
Is an increase in the production of goods and services in an economy.
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Unemployment
since less production means less demand for labor.
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Supply shock
An unexpected change in short- run or long- run aggregate supply.
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Aggregate demand
Is affected by many factors, however, it can all be categorized in groups.
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Foreign Purchaser effect
When price level rises, on reason aggregate demand declines is due to foreign demand decreasing.
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Expansion
A sustained improvement in economic activity.
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aggregate supply
In the short run, ________ is unaffected as a change in price level is not matched by a change in input costs.
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LRAS
An increase in resources or technological advances shifts ________ to the right, while a reduction in resources or a decline in technological productivity shifts ________ to the left.
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Aggregate demand
Is the amount of goods and services demanded by households, businesses, governments, and foreigners.
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Long- Run Aggregate Supply
After wages and other resource prices have adjusted to macroeconomic conditions.
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price level
A rise in ________ leads to an increase in aggregate supply.
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Aggregate Supply
is the amount of all goods and services brought to market by all producers.
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Aggregate supply
Is measured by dollars instead of value.
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Business cycle
is the pattern experienced by the economy
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Contraction
a sustained decline in economic activity
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Expansion
A sustained improvement in economic activity
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Peak
end of expansion and the beginning of contraction
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Trough
the end of contraction and the beginning of expansion
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Aggregate Supply
is the amount of all goods and services brought to market by all producers
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Long-Run Aggregate Supply
aggregate supply after wages and other resource prices have adjusted to macroeconomic conditions
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Two shifters of LRAS
Technological advances and increase/decrease in resources
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Short-run Aggregate Supply
aggregate supply before wages and other resource prices have adjusted to macroeconomic conditions
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Aggregate demand
is the amount of goods and services demanded by households, businesses, governments, and foreigners
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Foreign Purchaser effect
When price level rises, on reason aggregate demand declines is due to foreign demand decreasing
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The wealth effect
When households begin to spend more and gain less, this decreases aggregate demand
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Consumer Confidence
is a statistical measure of consumers feelings about current and future economic problems, and is used as indicator of the overall state of the economy
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Foreign purchases effect
foreigners demand less when domestic prices rise because their income have not risen in tandem, and domestic consumers prefer more imports since domestic prices are up2
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Wealth effect
financial wealth is destroyed when prices rise, this causes consumers to save more and spend less
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Equilibrium Price Level
The price level that equates aggregate supply and aggregate demand; the average level of prices in the economy
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Equilibrium Quantity
the amount of output that results in no shortage or surplus; the amount of goods and services bought and sold in the economy
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Stagflation
is consistent high inflation paired with high unemployment and stagnant demand in a countrys economy
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Supply shock
an unexpected change in short-run or long-run aggregate supply
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Economic growth
is an increase in the production of goods and services in an economy
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Increasing human capital
when labor becomes better triand and more effective