Modules 19 - 21

Model in which the aggregate supply curve and the aggregate demand curve are used together to analyze economic fluctuations.

• demand shock

• AD-AS model

• short-run equilibrium aggregate output

• short-run equilibrium aggregate price level

The quantity of aggregate output produced in the short-run macroeconomic equilibrium.

• AD-AS model

• short-run equilibrium aggregate output

• short-run equilibrium aggregate price level

• demand shock

The aggregate price level in the short-run macroeconomic equilibrium.

• Stagflation

• short-run equilibrium aggregate price level

• short-run equilibrium aggregate output

• Recessionary gap

An event that shifts the aggregate demand curve.

• Supply shock

• Wage shock

• Demand shock

• recessionary gap

An event that shifts the short-run aggregate supply curve.

• Supply shock

• Demand shock

• stagflation

• Inflationary gap

The combination of inflation and stagnating (or falling) aggregate output.

• Inflation

• Recessionary gap

• Stagflation

• Wage gap

When aggregate output is below potential output.

• stagflation

• inflationary gap

• recessionary gap

• deflation

When aggregate output is above potential output.

• Inflation rate

• Inflationary gap

• Recessionary gap

• Stagflation

The percentage difference between actual aggregate output and potential output.

• Wage gap

• Recessionary gap

• Output gap

• Inflationary gap

The use of government policy to reduce the severity of recessions and rein in excessively strong expansions.

• social insurance

• stabilization policy

• expansionary fiscal policy

• fiscal policy