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full employment
When the economy is producing below ________ or potential output, the process works in reverse.
international trade effect
The ________: In an open economy, a lower price level will mean that domestic goods become cheaper relative to foreign goods, so the demand for domestic goods will increase.
real value of money
The wealth effect:** the increase in spending that occurs because the ________ increases when the price level falls.
Adjustments
________ in wages and prices take the economy from short- run equilibrium to long- run equilibrium.
part of consumption
The by represents the ________ that is dependent on income.
Stagflation
________:** A decrease in real output with increasing prices.
price system
Normally, the ________ efficiently coordinates what goes on in an economy.
Input prices
________ (wages and materials): Increase in ________ will increase firms costs.
marginal propensity
The** ________ to save (MPS)** is defined as the ratio of additional savings to additional income.
physical capital
In the long run, the output is determined solely by the supply of human and ________ and the supply of labor, not the price level.
external events
Supply shocks** are ________ that shift the aggregate supply curve.
aggregate demand curve
Changes in taxes: A decrease in taxes will increase aggregate demand and shift the ________ to the right.
MPC
The ________ tells us how consumer spending will increase for every dollar that income increases.
price level
As the ________ or average level of prices in the economy changes, so does the purchasing power of your money.
aggregate demand
Changes in government spending: At any given price level, an increase in government spending will increase ________ and shift the aggregate demand curve to the right.
total shift
The ratio of the ________ in aggregate demand to the initial shift in aggregate demand is known as the** multiplier**
desires of consumers
On a day- to- day basis, the price system works silently in the background, matching the ________ with the output from producers.
Ca
________ is a constant and is independent of income which is called** autonomous consumption spending.
fast real GDP
Too slow "or "too ________ growth are examples of Economic fluctuations- movements of GDP away from potential output.
price system
The ________ provides signals to firms as to who buys what, how much to produce, what resources to use, and from whom to buy.
aggregate demand
Changes in the supply of money: An increase in supply of money in the economy will increase ________ and shift the aggregate demand curve to the right.
Note
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