Adverse Supply Shocks - Economic changes that suddenly and drastically increase the cost of inputs and thus shift the aggregate supply curve to the left. Aggregate Demand - The total demand for goods and services in an economy. Aggregate Supply - The total supply of goods and services in an economy. AS-AD Model - The model of aggregate supply and aggregate demand that is used to evaluate the effects of economic policy decisions. Capital - Physical machines and human experience that lead to productivity. Capital Stock - The total amount of capital, both physical and human, that exists in an economy. Contractionary Policy - Monetary and fiscal policy that shifts the aggregate demand curve to the left. Expansionary Policy - Monetary and fiscal policy that shifts the aggregate demand curve to the right. Expected Price Level - The level of prices that firms believe will exist at the time that contracts are made. Factors of Production - Refers to capital and labor, as these are the inputs that lead to productivity.
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