Economics Theme 2 (Macro) - Checkpoint 1.5

Front 1

Aggregate supply

Back 1

theamount of output that all firms in an economy are willing and able to supply at variousprice levels during a period of time

Front 2

Short run aggregate supply curve

Back 2

a curve showing how much output firms would be prepared to supply in the short run at any given overall price level

Front 3

Keynesian school

Back 3

a group of economists who believed that the macroeconomy could settle at an equilibrium that was below full employment and that government intervention (using fiscal stimulus) may be necessary to return the economy to full employment before "we are all dead".

Front 4

Keynesian long run aggregate supply curve

Back 4

A long run AS curve with elastic, upward sloping and vertical sections which allows for long run macroeconomic equilibrium below the full employment (full capacity) level of output/national income.

Front 5

Monetarist school

Back 5

a group of economists who believed that the macroeconomy always adjusts rapidly to the full employment level of output and that monetary policy should be the prime instrument for stabilizing the economy

Front 6

Neoclassical (monetarist) long run aggregate supply curve

Back 6

A vertical long run aggregate supply curve which assumes that long run macroeconomic equilbrium will ALWAYS occur at the full employment (full capacity) level of output/national income.

Front 7

Natural rate of output

Back 7

the long run equilibrium level of output to which monetarists believe the macroeconomy will always tend.

Front 8

Natural rate of unemployment

Back 8

the unemployment rate that will exist when the economy is in long run equilibrium.

Note: this is believed to be > zero.