Vocabulary
Practice the vocabulary words from the lesson.
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.