Principles of Macroeconomics, Chapter 13 – Flashcards
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aggregate supply
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the total supply of all goods and services in an economy
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aggregate supply (AS) curve
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a graph that shows the relationship between the aggregate quantity of output supplied by all firms in an economy and the overall price level
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cost shock (supply shock)
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a change in costs that shifts the short run AS curve
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equilibrium price level
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the price level at which AS and AD curves intersect
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potential GDP (potential output)
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the level of aggregate output that can be sustained in the long run without inflation
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demand-pull inflation
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inflation that is initiated by an increase in aggregate demand
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cost-push inflation (supply-side inflation)
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inflation caused by an increase in costs
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stagflation
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occurs when output is falling at the same time that prices are rising
