ECO207 Chapter 12 - Aggregate Demand and Aggregate Supply

aggregate demand

a schedule or curve that shows the amount of a country’s output (real GDP) that buyers collectively desire to purchase at each possible price level

aggregate supply

a schedule or curve showing the relationship between a country’s price level and the amount of real domestic output that firms produce

cost-push inflation

increases in the price level (inflation) resulting from an increase in resource costs and hence in per-unit production costs; inflation caused by reductions in aggregate supply

demand-pull inflation

increases in the price level (inflation) resulting from increases in aggregate demand

inflationary gap

when real output is greater than potential output (Qf)

potential output

the real output (GDP) an economy can produce when it fully employs its available resources

productivity gap

the difference between a country’s productivity level (measured as output per worker or output per hour worked) and that of its main export competitors or a benchmark economy

recessionary gap

when real output is less than potential output (Qf)