 | Economics 14/e McConnell | |||||
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| Economics 14/e McConnell | |||||
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aggregate demand
A schedule or curve which shows the total quantity of goods and services demanded (purchased) at different price levels.
wealth effect
(See Real balances effect.)
interest-rate effect
The tendency for increases in the price level to increase the demand for money raise interest rates and as a result reduce total spending in the economy (and the reverse for price level decreases).
foreign purchases effect
The inverse relationship between the net exports of an economy and its price level relative to foreign price levels.
determinants of aggregate demand
Factors such as consumption spending investment government spending and net exports which if they change shift the aggregate demand curve.
aggregate supply
A schedule or curve showing the total quantity of goods and services supplied (produced) at different price levels.
horizontal range (of AS curve)
The horizontal segment of the aggregate-supply curve along which the price level is constant as real domestic output changes.
vertical range (of AS curve)
The vertical segment of the aggregate supply curve along which the economy is at full capacity.
intermediate range (of AS curve)
The upsloping segment of the aggregate supply curve lying between the horizontal range and the vertical range.
determinants of aggregate supply
Factors such as input prices productivity and the legal-institutional environment which if they change shift the aggregate supply curve.
productivity
A measure of average output or real output per unit of input. For example the productivity of labor may be found by dividing real output by hours of work.
equilibrium price level
The price level at which the aggregate demand curve intersects the aggregate supply curve.
equilibrium real domestic output
The gross domestic product at which the total quantity of final goods and services purchased (aggregate expenditures) is equal to the total quantity of final goods and services produced (the real domestic output); the real domestic output at which the aggregate demand curve intersects the aggregate supply curve.
ratchet effect
The tendency for the price level to rise when aggregate demand increases but not fall when aggregate demand declines.
efficiency wages
A wage which minimizes wage costs per unit of output.
menu costs
The costs of adjusting prices in response to a recessive economy. Firms may want to wait to see if the decline in aggregate demand is permanent before going to the trouble of decreasing their prices. The term, menu cost comes from the most obvious example: the cost of reprinting new menus when a restaurant changes its prices.
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