Glossary: Policy Application

aggregate demand (AD)
the amount of total spending on domestic goods and services in an economy
aggregate supply (AS)
the total quantity of output (i.e. real GDP) firms will produce and sell
aggregate demand (AD) curve
the total spending on domestic goods and services at each price level
aggregate supply (AS) curve
the total quantity of output (i.e. real GDP) that firms will produce and sell at each price level
aggregate demand/aggregate supply model
a model that shows what determines total supply or total demand for the economy, and how total demand and total supply interact at the macroeconomic level
full-employment GDP
another name for potential GDP, when the economy is producing at its potential and unemployment is at the natural rate of unemployment
long run aggregate supply (LRAS) curve
vertical line at potential GDP showing no relationship between the price level for output and real GDP in the long run
potential GDP
the maximum quantity that an economy can produce given full employment of its existing levels of labor, physical capital, technology, and institutions
short run aggregate supply (SRAS) curve
positive short run relationship between the price level for output and real GDP, holding the prices of inputs fixed