Aggregate Demand and Aggregate Supply

Vocabulary

aggregate demand (AD)

total demand for goods and services in an economy at a given time

aggregate supply (AS)

total supply of final goods and services in an economy at a given time

consumer spending

total individual and household purchases of consumer goods and services

entrepreneurship

activity by companies and individuals bringing products to market

export

good or service sold in other countries

gross domestic product (GDP)

measurement of a country's total economic output

import

good or service produced abroad and bought domestically

interest rate

cost of borrowing money, expressed as a percentage of the amount borrowed; or, equivalently, the return on savings

menu cost

cost incurred when a business changes its prices

natural rate of unemployment

the amount of unemployment that occurs when the economy is producing at potential output

natural resource

a naturally existing form of physical capital that provides inputs to production, such as land, minerals, water, agricultural products, and forests

real wages

wages expressed in terms of the actual amount of goods and services that they can purchase, or wages adjusted for inflation

relative price

price of a good or service relative to the price of other goods and services

sticky price

a price that does not change quickly in response to shifts in supply or demand

sticky wage

a wage that does not change quickly in response to changes in the labor market