Aggregate Demand and Supply Concepts

Nominal GDP

Total monetary value of all goods produced.

P

Average prices index of goods and services.

Q

Real GDP, adjusted for inflation.

Aggregate Demand (AD)

Curve showing real GDP quantities at price levels.

Total Expenditures (TE)

Sum of consumption, investment, government, and net exports.

Consumption Spending

Household expenditures on goods and services.

Investment Spending

Business expenditures on capital goods.

Government Purchases

Government spending on goods and services.

Net Exports

Exports minus imports in trade balance.

Shift in Aggregate Demand

Changes in consumption, investment, government, or net exports.

Real Balance Effect

Impact of price changes on purchasing power.

International Trade Effect

Influence of price levels on exports and imports.

Used Goods Effect

Impact of used goods on aggregate demand.

Aggregate Supply (AS)

Curve showing RGDP offered at various price levels.

Unit Labor Cost

Total labor cost divided by output quantity.

Wage Changes

Adjustments in wages affecting aggregate supply.

Factor Productivity

Output per input unit affecting supply.

Supply Shocks

Unexpected events affecting supply levels.

Inflation Tax

Reduction in currency value due to inflation.

Horizontal Aggregate Supply Curve

Indicates constant price level with increased output.

Kinked Aggregate Supply Curve

Shows price rigidity in response to demand changes.

Three Aggregate Supply Curves

Horizontal, kinked, and three-stage models.

Great Depression Unemployment

Peak unemployment rate of 25% during 1930s.

Price Level Index (CPI)

Measures average price changes over time.