ECO ch 13

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  1. aggregate supply
    total supply of all goods and services in an economy
  2. aggregate supply (AS) curve
    • graph that shows the relationship between the aggregate quantity of output supplied by all firms in an economy and the overall price level
    • Is NOT a market supply curve
    • really a "price/output response" curve
  3. Y*
    The capacity of a AS curve. At this point the curve is vertical.
  4. Cost shock/Supply shock
    Change in costs that shifts the short-run AS curve
  5. Equilibrium price level
    Price level at which the aggregate demand and aggregate supply curves intersect
  6. Potential Output/Potential GDP
    Level of aggregate output that can be sustained in the long-run without inflation
  7. Monetary and Fiscal Policy Effects
    Aggregate demand can shift to the right for a number of reasons, including an increase in the money supply, a tax cut, or a increase in govt spending
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ECO ch 13
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