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19 Cards in this Set
- Front
- Back
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Aggregate supply curve
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shows the relationship between the aggregate price level and the quantity of aggregate output supplied. Essentially a supply curve in economic aggregate terms.
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Nominal wage
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actual dollar amount of the wage you are paid (nothing to do with inflation rate etc)
Sticky wage rate- wage rate does not readjust quickly to market conditions |
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Potential output
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is the level of real GDP the economy would produce if all prices, including nominal wages, were truly flexible.
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Aggregate demand curve
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same as the demand curve but in economic aggregate terms.
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Wealth effect
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how much money a person has and how changes in the aggregate prices can effecting buying power.
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Fiscal policy
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use of gov spending to manipulate economy in terms of purchasing , taxes and gov spending.
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Monetary policy
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government altering the amount of money in the economy to change it.
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Marginal propensity to consume
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is the increase in GDP when disposable income increases by a dollar
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Marginal propensity to save
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is the increase in household saving when disposable income increases by a dollar.
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Multiplier
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is the ratio of the total change in real GDP cause by an autonomous change in aggregate spending to the size of that change. Essentially the ripple effect, measuring all the ripples not just the first.
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AS- AD model
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the ag. Supply and ag. Demand curve on a graph. Tada
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Short run macroeconomic equilibrium
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when short run ag supply and ag demand intersect.
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Supply shock
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a shift in the short run ag. Supply curve
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Stagflation
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combination of inflation and falling aggregate output. Very bad
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Demand shock
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a shift in the demand curve
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Long run macroeconomic equilibrium
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when the short run supply curve, the long run supply curve and the demand curve all intersect.
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Recessionary gap
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when ag output is below potential output ( to left of LRAS)
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Inflationary gap
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when ag output is above potential output ( to right of LRAS)
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Self correcting
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the tendency of the economy to drift back toward equilibrium. Refers to the impact of shocks only on the short run rather than the long run.
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