Phillips Curve

Vocabulary

aggregate demand

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

aggregate supply

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

deterministic relationship

a relationship between two quantities in which the amount that exists of one quantity depends entirely upon the amount that exists of the other quantity

disposable income

income remaining after deduction of taxes and other mandatory expenses and addition of government transfers, which households can spend or save

inflationary gap

the difference between real GDP and the potential GDP that would exist in a condition of full employment, when real GDP is higher than potential GDP

inverse relationship

a relationship between two quantities such that the more of one that exists the less of the other exists, and vice versa

natural rate of unemployment

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

output gap

the difference between the maximum theoretical output of an economy and that economy's actual output

Phillips curve

the graph of the inverse relationship between inflation and unemployment

price inflation

the increase in price, over time, of a product or service

real wages

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

recessionary gap

the difference between real GDP and the potential GDP that would exist in a condition of full employment, when real GDP is lower than potential GDP

stagflation

an economic situation of slow or stagnating growth, high inflation, high unemployment, and low consumer demand

wage inflation

increase over time in wages paid