McConnell, Brue, Flynn: Economics, 20th Edition Chapter 30 – Flashcards
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aggregate demand curve
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shows inverse relationship between price level and real GDP
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real balances effect
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a higher price level reduces the purchasing power of money (savings) -- less consumption spending
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interest rate effect
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as prices rise, demand for money goes up (interest rates rise) -- less interest-sensitive consumption spending
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foreign purchases effect
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as prices rise compared to foreign prices, export decrease
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determinants of aggregate demand
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consumer spending, investment spending, government spending, net export spending
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aggregate supply in the immediate market period
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horizontal GDP vs. price slope
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aggregate supply in the short term
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increasing GDP vs. price slope
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aggregate supply in the long term
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vertical GDP vs. price slope
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determinants of aggregate supply
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change in input prices, productivity, legal-institutional environment
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AD/AS equilibrium change: +AD
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demand pull inflation
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AD/AS equilibrium change: -AD
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recession and cyclical unemployment
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AD/AS equilibrium change: -AS
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cost-push inflation
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AD/AS equilibrium change: +AS
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full employment with price level stability
