| Aggregate demand | The total demand for the economy's production; the sum of consumption, investment, government purchases, and net exports.
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| Aggregate demand (AD) curve | The graph of the relationship between inflation and the quantity of spending on domestically produced goods and services.
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| Consumption | Spending by individuals for items like food, clothing, housing, transportation, entertainment, and education.
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| Expansionary gap | When current output exceeds potential output; the gap puts upward pressure on inflation.
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| Government purchases | Spending on goods and services by federal, state, and local governments.
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| Investment | Spending by firms for additions to the physical capital they use to produce goods and services.
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| Long-run real interest rate | The real interest rate that equates aggregate demand with potential output.
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| Monetary policy reaction curve | The relationship between the real interest rate set by the central bank and the level of inflation.
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| Net exports | Exports minus imports; it represents an addition to the demand for domestically produced goods.
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| Output gap | The difference between current output and potential output.
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| Recessionary gap | When current output is below potential output; the gap puts downward pressure on inflation.
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