Aggregate Demand: The total demand for all goods and services in a country at varying price levels. Aggregate demand is expressed by the equation AD = C + I + G + Xn.
Aggregate Supply: The total output of goods and services produced in a nation at varying price levels.
Inflationary Gap: A condition that arises when a country’s real GDP and the level of GDP with full employment causes an increase in consumption leading to higher prices.
Recessionary Gap: When an economy is currently operating at a GDP level below its full employment GDP.
Full employment: When the economy is operating at an neutral level of unemployment, which in the United States has been considered 4-5% unemployment.
Long Run Equilibrium: The level at which an economy is considered to be at full employment of its available resources.
Long Run Aggregate Supply: The potential output in an economy when all prices and wages are flexible
Short Run: A period of time when price level can change but resource price and wages haven’t had time to adjust.
Long Run: A period of time in which all factors of production and costs are variable.
