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11 Cards in this Set

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  • Back

Aggregate Demand Curve

A relationship between overall spending in the economy and the aggregate price level.

Real Balance Effect

The hypothesis that overall wealth in the economy will be inversely related to the overall price level, ad therefore the aggregate demand and the price level will be inversely related.

Foreign Trade Effect
The hypothesis that net exports will be inversely related to the overall price level, and therefore that aggregate demand and the price level will be inversely related.

Short-Run Aggregate Supply (SRAS) Curve

A relationship between real output and the overall price level in the short run; a horizontal version of the curve indicates that firms in the short run meet demand, on average, at existing prices.


Long-Run Aggregate Supply (LRAS) Curve

A relationship between potential output and the inflation rate, a vertical curve indicating that potential output is independent of the inflation rate.

Stagflation

The combination of a recessionary gap and a rising price level.

Phillips Curve

A term that typically refers to a statistical relationship between the inflation rate and the unemployment rate.

Expectations-Augmented Phillips Curve Model


Distinguishes between a short-run and a long-run Phillips curve and argues that short-run version shifts when expectations about the inflation rate change.

Long-Run Phillip's Curve
A relationship between the inflation rate and the unemployment rate in the long run; the vertical curve is drawn at the natural rate of unemployment.

Short-Run Phillip's Curve

A relationship between actual unemployment and the inflation rate for given inflationary expectations.

Adaptive Expectations of Inflation

A method of forming expectations about the inflation rate that involves looking to past experience, especially recent past experience.