Chapter 33 - Aggregate Demand and Aggregate Supply

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Real GDP

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Real GDP

________ is commonly used to watch short- run changes in the economy.

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stickiness of wages

The ________ provides an incentive to produce less output (when the price level is lower) and more output (when the price level is higher)

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Stagflation

________: a period of falling outputs and rising prices.

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Technology

________ and monetary policy are the two most important influencers of the economy in practice.

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Policymakers

________ who can influence aggregate demand can navigate the adverse impact on output but only at the cost of making inflation worse.

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available technology

(In the long run): the real GDP depends on supplies of labor, capital, and natural resources and on the ________ used to produce goods and services.

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larger quantity of goods

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

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Misperceptions Theory

The ________: Changes in the overall price level can mislead suppliers about what actually occurs in certain markets where their products are sold.

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final goods

It measures the value of all ________ and services produced within a given period of time and measures the total income of everyone in the economy.

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Price Level

The ________ and Net Exports (The Exchange- Rate Effect): When a fall in the US ________ causes US interest rates to fall, the real value of the dollar declines in foreign exchange markets.

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Stagnation

________: falling output.

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Pessimism

________ about the future leads to falling incomes and rising unemployment.

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Money itself

________ is insignificant, but the effect that it has on everyone is The Reality of Short- Run Fluctuations.

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Technological Knowledge

Shifts Arising from ________: Better technology means more supplies produced.

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unemployment rate

The ________ is never 0 33- 2 Explaining Short- Run Economic Fluctuations The Assumptions of Classical Economics.

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Recession

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

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Depression

________: a severe recession.

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Quantity of output

________ supplied depends on the three theories: the sticky wage theory, the sticky price theory, and the misperceptions theory.

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Firms

________ produce a smaller amount of output.

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Shifts

________ Arising from Changes in Capital: An increase in capital stock increase productivity and supplies.

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Sticky Wage Theory

________: Wages are slow to change when economic conditions change.

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model of aggregate demand

The ________ and aggregate supply is commonly used among economists to explain short- run fluctuations.

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natural resources

Shifts in the long- run aggregate supply curve arise from changes in labor, capital, ________, or technological knowledge.

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Higher costs

________ lead to higher wages which mean higher prices, leading to a wage- price spiral.

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short run fluctuations

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

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