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ECON 102 Chapter Notes - Chapter 12: Output Gap, Stagflation, Demand Shock

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School
U of M
Department
Economics
Course
ECON 102
Professor
Adam Stevenson

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ECON 102 Full Course Notes
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ECON 102 Full Course Notes
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Document Summary

Aggregate demand curve - shows the relationship between aggregate price level and quantity aggregate output demanded by households, businesses, the government, and the rest of the world. Wealth effect of a change in the aggregate price level - effect on consumer spending caused by the effect of a change in the aggregate price level on the purchasing power of consumers" assets. Aggregate supply curve - shows the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy. Nominal wage - dollar amount of the wage paid. Sticky wages - nominal wages that are slow to fall even in the face of high unemployment and slow to rise even in the face of labor shortages. Short-run aggregate supply curve - shows the relationship between the aggregate price level and the quantity of aggregate output supplied that exists in the short run, the time period when many production costs can be taken as fixed.

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Related Questions

Which of the following best describes the aggregate demand curve?
a. As the aggregate price level decreases, the stock of existing physical capital increases.
b. As the aggregate price level increases, consumer expectations about the future change.
c. An increase in the aggregate price level causes consumer and investment spending to fall because consumer purchasing power decreases and money demand increases.
d. As a good's price increases, holding all else constant, the good's quantity demanded decreases.

which of the following best describes why the aggregate demand curve is downward sloping?

a. As the aggregate price level decreases, the stock of existing physical capital increases.

b. As the aggregate price level increases, consumer expectations about future change.

c. An increase in the aggregate price level causes consumer and investment spending to fall because consumer purchasing power decreases and money demand increases.

d. As a good's price increases, holding all else constant, the good's quantity demanded decreases.

The long-run aggregate supply curve

A. is vertical because changes in the price level have no effect on real output.

B. is downward sloping because a higher price level causes businesses and consumers to reduce spending.

C. is vertical because a change in real GDP has no effect on the price level.

D. shows the various amounts of real output businesses are willing to consume at each price level.