econ 13 and 14

stagflation

a condition that occurs when an economy experiences the twin maladies of high unemployment and rapid inflation simultaneously

deflation

a decrease in the general (average) price level of goods and services in the economy

adjustable rate mortgage

a home loan that adjusts the nominal interest rate to changes in an index rate, such as rates on treasury securities

disinflation

a reduction in the rate of inflation

demand pull inflation

a rise in the general price level resulting from an excess of total spending. "too much money chasing too few goods". occurs at or close to full employment; total or aggregate demand for goods and services is high- causes ADC to shift rightward

wage price spiral

a situation that occurs when increases in nominal wage rates are passed on in higher prices, which, in turn, result in even higher nominal wage rates and prices

base year

a year chosen as a reference point for comparison with some earlier or later year

hyperinflation

an extremely rapid rise in the general price level

inflation

an increase in the general (average) price level of goods and services in the economy

cost push inflation

an increase in the general price level resulting from an increase in the cost of production- causes ASC to shift leftward

CPI

an index that measures changes in the average prices of consumer goods and services

keynesian range

horizontal segment of supply curve; increased by an increase in real GDP and employment, price level doesn't change. represents an economy in a severe recession

real income

the actual number of dollars received (nominal income) adjusted for changes in the CPI. measures the amount of goods and services that can be purchased with one's nominal income

nominal income

the actual number of dollars received over a period of time

nominal interest rate

the actual rate of interest without adjustment for the inflation rate

aggregate supply curve

the curve that shows the level of real GDP produced at different possible price levels during a time period

aggregate demand curve

the curve that shows the level of real GDP purchased by households, businesses, govt, and foreigners (net exports) at different possible price levels during a time period

interest rate effect

the impact on total spending (real GDP) caused by the direct relationship between the price level and the interest rate (at a lower prices, lower interest rates, ppl buy more-real GDP demand increases)

net exports effect

the impact on total spending (real GDP) caused by the inverse relationship between the price level and the net exports of an economy (lower prices, US goods less expensive, exports rise and imports fall-real GDP demand increases)

real balances effect

the impact on total spending (real GDP) caused by the inverse relationship between the price level and the real value of financial assets with fixed nominal value (lower prices, more wealth, buy more goods-real GDP demand increases)

real interest rate

the nominal rate of interest minus the inflation rate

inflation rate

the percentage change in the official CPI from one year to the next (given year-previous year)/(previous year) X 100

intermediate range

the rising segment of the supply curve, which represents an economy as it approaches full employment output

wealth

the value of the stock of assets owned at some point in time

classical range

vertical segment of supply curve; changed by a change in price level. represents an economy at full employment output