Please review the following key terms. (20)(21)(22)(23)
Aggregate demand (AD) — curve the relationship between the total spending on domestic goods and services and the price level for output
Aggregate demand/aggregate supply (AD/AS) model — a model that shows what determines total supply or total demand for the economy, and how total demand and total supply interact at the macroeconomic level
Aggregate supply (AS) — curve the relationship between real GDP and the price level for output, holding the price of inputs fixed
Aggregate supply (AS) — the relationship between real GDP and the price level for output, holding the price of inputs fixed
Balanced budget — when government spending and taxes are equal
Budget deficit — when the federal government spends more money than it receives in taxes in a given year
Budget surplus — when the government receives more money in taxes than it spends in a year
Contractionary fiscal policy — fiscal policy that decreases the level of aggregate demand, either through cuts in government spending or increases in taxes
Expansionary fiscal policy — fiscal policy that increases the level of aggregate demand, either through cuts in government spending or increases in taxes
Full-employment GDP — another name for potential GDP, when the economy is producing at its potential and unemployment is at the natural rate of unemployment
Keynes’ law — “demand creates its own supply”
Legislative lag — the time it takes to get a fiscal policy bill passed
National debt — the total accumulated amount the government has borrowed, over time, and not yet paid back
Neoclassical economists — who generally emphasize the importance of aggregate supply in determining the size of the macro economy over the long run
Potential GDP — the maximum quantity that an economy can produce given full employment of its existing levels of labor, physical capital, technology, and institutions
Say’s law — “supply creates its own demand”
Stagflation — an economy experiences stagnant growth and high inflation at the same time
