Economics 14/e   McConnell
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short-run aggregate supply curve

An aggregate supply curve relevant to a time period in which input prices (particularly nominal wages) do not change in response to changes in the price level.

long-run aggregate supply curve

The aggregate supply curve associated with a time period in which input prices (especially nominal wages) are fully responsive to changes in the price level.

Phillips Curve

A curve showing the relationship between the unemployment rate (on the horizontal axis) and the annual rate of increase in the price level (on the vertical axis).

stagflation

Inflation accompanied by stagnation in the rate of growth of output and an increase in unemployment in the economy; simultaneous increases in the price level and the unemployment rate.

aggregate supply shocks

Rapid and signifigant increases in resource costs which jolt an economy's short-run aggregate supply curve leftward.

natural-rate hypothesis

The idea that the economy is stable in the long run at the natural rate of unemployment; views the long-run Phillips Curve as vertical at the natural rate of unemployment.

adaptive expectations theory

The idea that people determine their expectations about future events (for example inflation) on the basis of past and present events (rates of inflation) and only change their expectations as events
unfold.

disinflation

A reduction in the rate of inflation.

rational expectations theory

The hypothesis that firms and households expect monetary and fiscal policies to have certain effects on the economy and (in pursuit of their own self-interests) take actions which make those policies ineffective.

supply-side economics

A view of macroeconomics which emphasizes the role of costs and aggregate supply in explaining inflation unemployment and economic growth.

Laffer Curve

A curve showing the relationship between tax rates and the tax revenues of government and on which there is a tax rate (between 0 and 100 percent) where tax revenues are a maximum.

Reaganomics

Substantial reduction in government regulation personal and corporate income tax rates were cut sharply the latter by about 25% over 3 years.

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