Chapter 20 - Aggregate Demand and Aggregate Supply

Interest rates

________ fall, which stimulates the demand for investment goods.

Real GDP

________ is the variable most commonly used to monitor short- run changes in the economy.

overall price level

Changes in the ________ can temporarily mislead suppliers about what is happening in the individual markets in which they sell their output.

real GDP falls

When __________ in a recession, personal income, corporate profits, consumer spending, investment spending, industrial production, retail sales, home sales, auto sales, etc.

larger quantity of goods

The increase in consumer spending means a(n) ________ and services demanded.

Consumers

________ are wealthier, which stimulates the demand for consumption goods.

Stagflation

________- a period of falling output and rising prices.

price level

A decrease in the ________ raises the real value of money and makes consumers wealthier, which in turn encourages them to spend more.

Depression

________- a severe recession.

Recession

________- a period of declining real incomes and rising unemployment.

currency

The ________ depreciates, which stimulates the demand for net exports.

business cycle

fluctuations in the economy.

Nominal wages

________ are slow to adjust to changing economic conditions.

Short run fluctuations

________ in output and the price level should be viewed as deviations from the continuing long- run trends of output growth and inflation.

Interest-rate effect

The price level and investment

interest rates

When a fall in the U.S. price level causes U.S. ________ to fall, the real value of the dollar declines in foreign exchange markets.

Wealth effect

The price level and consumption

interest rate

Conversely, a higher price level raises the ________, discourages investment spending, and decreases the quantity of goods and services demanded.

Exchange-rate effect

The price level and net exports