Macroeconomics Flashcards

Flashcards covering Aggregate Demand and Aggregate Supply concepts.

Aggregate Demand Curve

Shows that the quantity of output that buyers collectively plan to purchase falls as the average price level rises.

Aggregate Supply Curve

Shows that the quantity of output that suppliers collectively produce rises as the average price level rises.

Macroeconomic Equilibrium

The point where aggregate demand and aggregate supply curves intersect, indicating macroeconomic equilibrium.

Aggregate Demand Curve

Summarizes the connection from the average price level to the quantity of output that buyers demand.

Shift in Aggregate Demand Curve (Increase)

An increase in aggregate expenditure causes the aggregate demand curve to shift to the right.

Shift in Aggregate Demand Curve (Decrease)

A decrease in aggregate expenditure causes the aggregate demand curve to shift to the left.

Aggregate Demand Shifters

Consumption, investment, government purchases, and net exports.

Aggregate Supply

The relationship between the quantity of output supplied and the average price level.

Aggregate Supply Curve

A curve illustrating the relationship between the quantity of output supplied and the average price level.

Shift in Aggregate Supply Curve (Increase)

A fall in production costs causes the aggregate supply curve to shift to the right (or downward).

Shift in Aggregate Supply Curve (Decrease)

A rise in production costs causes the aggregate supply curve to shift to the left (or upward).

Effect of Expansionary Policy on Aggregate Demand

Expansionary fiscal or monetary policy shifts the aggregate demand curve to the right.

Taylor Rule

A rule that describes how the RBA sets interest rates based on inflation and output gaps.

Long-Run Aggregate Supply

In the long run when all prices are flexible, shifts in aggregate demand affect the price level but not output.

Vertical Long-Run Aggregate Supply Curve

The quantity of output supplied is unaffected by the average price level, yielding a vertical long-run aggregate supply curve.

Very Short-Run Aggregate Supply

In the very short run when prices are fixed, aggregate demand shifts affect output, but not the price level.

Horizontal Very-Short-Run Aggregate Supply Curve

Prices are yet to change and so the very-short-run aggregate supply curve is horizontal.

Short-Run Aggregate Supply Curve

Some suppliers adjust their prices in the short run, resulting in an upward-sloping short-run aggregate supply curve.

Real Business Cycle Theory

Fluctuations driven by real forces in the economy.

Heterodox Theories

Fluctuations largely result of credit cycles.