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chapter 16: Achieving Economic Stability (stagflation- period of stagnant…
chapter 16: Achieving Economic Stability
stagflation- period of stagnant growth combined with inflation
aggregate supply- total value of goods and services that all firms would produce in a specific period of time at various price levels
macroeconomic equilibrium- level of real GDP consistent with a given price level, as determined by the intersection of the aggregate supply and demand curve
GDP gap- difference between the actual GDP and the potential GDP that could be produced if all resources were fully employed
aggregate supply curve- which shows the amount of real GDP that could be produced at various levels
fiscal policy- federal government's attempt to stabilize the economy through taxing and government spending
misery index- sometimes called discomfort index
aggregate demand- total quantity of goods and services demanded at different price levels
Keynesian economics- set of actions designed to lower unemployment by stimulating aggregate demand
discomfort index- sum of the monthly inflation and unemployment rates
aggregate demand curve- graph showing the quantity of real GDP that would be purchased at each possible price level in the economy
multiplier- change in investment spending will have a magnified effect on total spending
accelerator- change in investment spending caused by a change in total spending
wage-price controls- regulations that makes it illegal for business to give workers raises-or to raise prices without the explict permission of the government
automatic stabilizers- programs that automatically trigger benefits if changes in the economy threaten income
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unemployment insurance- insurance that workers who lose their jobs through no fault of their own can collect for a limited amount of time
supply-side economics- policies designed to stimulate output and lower unemployment by increasing production rather than demand
council of economic advisers- three member group that reports on economic developments and proposes strategies