| aggregate demand (AD) curve | Relationship between the amount of goods and
services people wish to purchase and the price level.
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| aggregate supply–aggregate demand model | Uniquely determines price level and
level of output at which the economy is in equilibrium.
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| aggregate supply (AS) curve | Relationship between the amount of final goods and
services produced in an economy and the price level.
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| business cycle | Pattern of expansion and contraction of the economy.
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| consumer price index (CPI) | Fixed-weight price index that measures the cost of the
goods purchased by the typical urban family.
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| growth rate | Rate at which a variable increases in value; percentage change in the level of a variable.
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| growth theory | Tries to explain why output grows over time and to identify the factors that affect its growth rate.
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| inflation | Percentage rate of increase in the general price level.
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| long run | In AS–AD analysis, period of time long enough for prices to clear all markets
so that output is equal to potential output, but short enough for potential output
to be fixed.
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| output gap | Difference between actual GDP and potential GDP.
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| Phillips curve | Relation between inflation and unemployment; in a sense, a dynamic
version of the aggregate supply curve.
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| potential output | Output that is produced when all factors are fully employed.
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| recession | Period of diminishing economic activity, usually, but not always, marked by
two quarters or more of declining RGDP.
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| short run | A period of time short enough that markets are unable to clear, so that
output can deviate from potential output.
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| trend path of GDP | See trend path of output.
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| very long run | A period of decades or more, over which potential output is expected to grow.
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