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  1. aggregate-demand curve
    a curve that shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level
  2. aggregate-supply curve
    a curve that shows the quantity of goods and services that firms choose to produce and sell at each price level
  3. depression
    a severe recession

    Ex: timing can't tell until it is over
  4. model of aggregate demand and aggregate supply
    the model that most economists use to explain short-run fluctuations in economic activity around its long-run trend
  5. natural rate of output
    the production of goods and services that an economy achieves in the long run when unemployment is at its normal rate
  6. recession
    a period of declining real incomes and rising unemployment
  7. stagflation
    a period of falling output and rising prices
  8. Short Run
    From year to year the economic activity fluctuates around its long-run trend
  9. Long Run
    • Over the Long Run (Over Years 1960-1990)
    • Real GDP in the Us Grows at an average 3% a year
  10. Business Cycles
    Short-Run economic fluctuation are often called Business cycles
  11. Neutrality of money
    Changes in the money supply affect nominal but not real variables
  12. Increase in interest rate
    • 1. Goes up
    • 2.To get funds people sale bonds
    • of loadable funds drop
    • 4. which drives up interest rates
    • 5. the increase in interest rates decrease spending on investment goods
  13. Three Effects of Aggregate Demand Curve
    Wealth Effect: consumers are wealthier and this stimulate the demand for consumption

    Interest Rate: Effect: Lower prices cause interest rates to fall this stimulates the demand for investments. 

    International Trade Effect: Lower domestic prices result in a depreciation of the domestic currency which in turn stimulates the demand for net exports
  14. Shift of Aggregate Demand Curve
    Events that Change the Amount of Consumption:

    • 1. Stock Market Boom
    • 2. Monetary Policy
    • 3. Fiscal Policy
  15. Three Theories Short Run Aggregate Supply
    1. Sticky Wage Theory = Nominal wages are slow to adjust to changing economic condition

    2. Sticky Price Theory = prices in the short run are sticky (do not change) due to menu cost

    • 3. Mis-preception Theory
    • changes in overall price level can temporally mislead people to believe that prices change only effect their individual market
Card Set:
2013-07-03 22:56:15
Chapter 20

Flash cards from Principles Of Macroeconomics 6th Edition Mankiw
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