Planned investment: the amount that firms plan or intend to invest.
Investment schedule: a curve or schedule that shows the amounts firms plan to invest at various possible values of real gdp.
Aggregate expenditures schedule: a schedule or curve showing the total amount spend for final goods and services at different level of real gdp.
Equilibrium gdp: the total quantity of final goods and services purchased is equal to the total quantity of final goods and services produced.
Leakage: a withdrawal of potential spending from the income expenditures stream via saving, tax payments, or imports.
Injection: an addition in spending to the income expenditure stream.
Unplanned changes in inventories: changes in inventories that firms did not anticipate; changes in inventories that occur because of unexpected increases or decreases of aggregate spending. net exports: exports minus imports.
Lump-sum tax: a tax that collects a constant amount at all levels of gdp.
Recessionary expenditure gap: the amount by which the aggregate expenditures schedule must shift upward to increase the real gdp to its full employment noninflationary level.
Inflationary expenditure gap: the amount by which the aggregate expenditures schedule must shift downward to decrease the nominal gdp to its full employment noninflationary level.
Chapter 12 Key Terms:
Aggregate demand-aggregate supply model: the macro model that uses aggregate demand and aggregate supply to determine and explain the price level and the real domestic output.
Aggregate demand: a schedule or curve that shows the total quantity of goods and services demanded at different price levels.
Real-balances effect: the tendency for increase in the price level to lower the real value 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.
Interest-rate effect: the tendency for increase in the price level to increase the demand for money raise interest rates and as a result reduce total spending and real output in the economy.
Foreign purchases effect: the inverse relationship between the net exports of an economy and its price level relative to foreign price levels.
Determinants of aggregate demand: factors such as consumption spending, investment, gov spending, and net exports that if they exchange, shift the aggregate demand curve.
Aggregate supply: a schedule or curve showing the total quantity of goods and services supplied at different price levels.
Immediate short run aggregate supply curve: an aggregate supply curve for which real output but not the price level changes when the aggregate demand curves shifts a horizontal aggregate supply curve that implies an inflexible price level.
Short run aggregate supply curve: an aggregate supply curve relevant to a time period in which input prices do not change in response to changes in price level.
Long run aggregate supply curve: the aggregate supply curve associated with a time period in which input prices are fully responsive to changes in the price level.
Determinants of aggregate supply: factors such as input prices, productivity and legal institutional environment that if the change shift the aggregate supply curve.
Productivity: a measure of average output or real output per unit of input.
Equilibrium price level: the price level at which the aggregate demand curve intersects the aggregate supply curve.
Equilibrium real output: the GDP at which the total quantity of final goods and services purchased is equal to the total quantity of final goods and services produced.
Menu costs: the reluctance of firms to cut prices during recessions because of the costs of altering and communicating their price reductions.
Efficiency wages: a wage that minimizes wage costs per unit of output by encouraging greater effort or reducing turnover.
Chapter 13 Key Terms
Fiscal policy: changes in government spending and