AP ECON CH. 29 and 30
Terms in this set (13)
aggregate demand-aggregate supply (AD-AS) model
the macroeconomic model that uses aggregate demand and aggregate supply to determine and explain the price level and the real domestic output.
a schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels.
the tendency for increases in the price level to lower the real value (or purchasing power) of financial assets with fixed money value and, as a result, to reduce total spending and real output, and conversely for decreases in the price level.
the tendency for increases in the price level to increase the demand for money, raise interest rates, and, as a result, reduce total spending and real output in the economy (and the reverse for price-level decreases).
foreign purchases effect
the inverse relationship between the net exports of an economy and its price level relative to foreign price levels.
determinants of aggregate demand
factors such as consumption spending, investment, government spending, and net exports that if they change, shift the aggregate demand curve.
a schedule or curve showing the total quantity of goods and services supplied (produced) at different price levels.
immediate-short-run aggregate supply curve
an aggregate supply for which real output, but no the price level, changes when the aggregate demand curves shifts; a horizontal aggregate supply curve that implies an inflexible price level.
determinants of aggregate supply
factors such as input prices, productivity, and the legal-institutional environment that, if they change, shift the aggregate supply curve.
equilibrium price level
the price level at which the aggregate demand curve intersects the aggregate supply curve.
equilibrium real output
the GDP at which the total quantity of final goods and services purcahsed (AE) is equal to the total quantity of final goods and services produced (real domestic output); the real domestic output at which the aggregate demand curve intersects the aggregate supply curve
a wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover.
expanisionary fiscal policy
an increase in government purchases of goods and services, a decrease in net taxes, or some combination of the two for the purpose of increasing aggregate demand and expanding real output.