278 Glossary: Policy Application
- aggregate demand (AD)
- the amount of total spending on domestic goods and services in an economy
- aggregate supply (AS)
- the total quantity of output (i.e. real GDP) firms will produce and sell
- aggregate demand (AD) curve
- the total spending on domestic goods and services at each price level
- aggregate supply (AS) curve
- the total quantity of output (i.e. real GDP) that firms will produce and sell at each price level
- aggregate demand/aggregate supply 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
- 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
- long run aggregate supply (LRAS) curve
- vertical line at potential GDP showing no relationship between the price level for output and real GDP in 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
- short run aggregate supply (SRAS) curve
- positive short run relationship between the price level for output and real GDP, holding the prices of inputs fixed
