Campbell R. McConnell,
University of Nebraska, Lincoln
Stanley L. Brue,
Pacific Lutheran University
Thomas P. Barbiero,
Ryerson University
| Aggregate demand | A schedule or curve that shows the total quantity of goods and services demanded (purchased) at different price levels.
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| Aggregate demand-aggregate supply model | The macroeconomic model that uses aggregate demand and aggregate supply to determine and explain the price level and the real domestic output.
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| Determinants of aggregate demand | Factors such as consumption spending, investment, government spending, and net exports that, if they change, shift the aggregate demand curve.
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| Determinants of aggregate supply | Factors such as input prices, productivity, and the legal-institutional environment that, if they change, shift the aggregate supply curve.
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| Equilibrium price level | The price level at which the aggregate demand curve intersects the aggregate supply curve.
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| 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.
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| Foreign trade effect | The inverse relationship between the net exports of an economy and its price level relative to foreign price levels.
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| Inflationary gap | The amount by which the equilibrium GDP exceeds full-employment GDP.
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| 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).
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| 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.
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| Real-balances effect | The tendency for increases in the price level to lower the real value (or purchasing power) of financial assets with fixed money value and, as a result, to reduce total spending and real output; and conversely for decreases in the price level.
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| Recessionary gap | The amount by which equilibrium GDP falls short of full-employment GDP.
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| Short-run aggregate supply | A schedule or curve that shows the level of real domestic output that will be produced at each price level.
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2002 McGraw-Hill Higher Education