AP_Macroecon_Chapter10 - AP Macroecon Chapter10 CHAPTER...

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\AP Macroecon Chapter10 CHAPTER OBJECTIVES After studying this chapter students should be able to 1. Understand the concept of long-run aggregate supply. 2. Describe the effect on economic growth on the long-run aggregate supply curve. 3. Explain why the aggregate demand curve slopes downward and list key factors that cause this curve to shift.. 4. Discuss the meaning of long-run equilibrium for the economy as a whole. 5. Evaluate why economic growth can cause deflation. 6. Evaluate the likely reasons for persistent inflation in recent decades. VOCABULARY Aggregate demand Aggregate supply Real-Balance effect Interest rate effect Open economy effect Long-run Supply curve Short-run Aggregate Supply curve Aggregate demand shock Aggregate supply shock Contractionary gap Demand-pull inflation CHAPTER OUTLINE I. OUTPUT GROWTH AND THE LONG-RUN AGGREGATE SUPPLY CURVE: The total of all planned production for the entire economy is referred to as the aggregate supply of real output. The Long-Run Aggregate Supply Curve: The long-run aggregate supply curve (LRAS) is some amount of output of real goods and services in a world in which technology is constant, the price level has not changed, labor productivity has not changed, all resources are fully employed, and people have fully adjusted to all the information they have.

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