Glossary

aggregate demand (AD)	The amounts of real domestic output which domestic consumers, business, governments, and foreign buyers collectively will desire to purchase at each possible price level.



aggregate supply	The level of real domestic output available at each possible price level.



cost-push inflation	Inflation caused by a decrease in aggregate supply.



demand-pull inflation	Inflation caused by an increase in aggregate demand.



foreign purchases effect	When domestic prices are high, we will export less to foreign buyers and we will import more from foreign producers. Therefore, higher prices lead to less domestic output.



interest rate effect	Higher prices lead to inflation, which leads to less borrowing and a lowering of the RGDP.



real-balances effect	Because higher prices reduce real spending power, prices and output are negatively related



supply-side economics	Government policy intended to influence the economy through aggregate supply by lowering input costs and reducing regulation

2003 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.