Flashcards
macroeconomics chapter 9
Cards in this deck (8)
- 1aggregate supplyThe total supply of all goods and services in an economy.
- 2aggregate supply (AS) curveA graph that shows the relationship between the aggregate quantity of output supplied by all firms in an economy and the overall price level.
- 3The Short-Run Aggregate Supply CurveIn the short run, the aggregate supply curve (the price/output response curve) has a positive slope.
At low levels of aggregate output, the curve is fairly flat.
As the economy approaches capacity, the curve becomes nearly vertical.
At capacity, the curve is vertical. - 4cost shock, or supply shockA change in costs shifts the short-run aggregate supply (AS) curve.
- 5equilibrium price levelThe price level at which the aggregate demand and aggregate supply curves intersect.
- 6The Long-Run Aggregate Supply CurveWhen the AD curve shifts from AD0 to AD1, the equilibrium price level initially rises from P0 to P1 and output rises from Y0 to Y1.
Wages respond in the longer run, shifting the AS curve from AS0 to AS1.
If wages fully adjust, output will be back at Y0. Y0 is sometimes called potential GDP.
- 7potential output, or potential GDPThe level of aggregate output that can be sustained in the long run without inflation.
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- Business/Economics Flashcards on macroeconomics chapter 9, created by Lama Masri on 05/06/2021.
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