8 and 9

An expansion

occurs whenever the economy is growing—that is, when real GDP is increasing from year to year

The aggregate supply curve

represents the total quantity of goods and services supplied by domestic suppliers as a function of the price level.

Job loser: Job leaver: Reentrant: New entrant:

1.A person who was employed in the civilian labor force and was either fired or laid off. 2. A person who was employed in the civilian labor force but then quit his or her job. 3. A person who was previously employed, hasn't worked for some time, and is currently reentering the labor force. 4. A person who has never held a full-time job for 2 weeks or longer and is now in the civilian labor force looking for a job.

Full employment

occurs when the economy's output is at its natural level, not its maximum level.

fall, rise, fall, rise, rise, exchange rate

Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to ______ in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore _____, and the number of foreign products purchased by domestic consumers and firms (imports) will _______. Net exports will therefore _____, causing the quantity of domestic output demanded to ______. This phenomenon is known as the _______ effect.

The vertical axis of a diagram of the aggregate demand and aggregate supply curves measures which of the following?

An economy's price level

Which of the following are reasons that the short-run aggregate supply curve slopes upward? Check all that apply

As the price level rises, firms find it more profitable to hire workers at any given wage. As the price level rises, firms expand their production because they can sell their output for more money.

The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to increase aggregate demand.Change Needed to Increase AD forConsumer expectations about future profitability = __________Government spending = __________Expected rate of return on investment = __________Incomes in other countries = __________

ImproveIncreaseIncreaseIncreaseConsumer spending is influenced, in part, by consumer expectations. If households expect strong economic growth and higher earnings, they will spend more today. The increase in current consumption causes an increase in aggregate demand at each price level.Because government purchases are one component of aggregate demand, an increase in government spending causes aggregate demand to increase at each price level.The rate of return that businesses expect on capital projects is a key determinant of investment. Suppose a technological breakthrough causes an increase in the expected return on investment. Investment spending will rise, and aggregate demand will increase at each price level. When the incomes of foreigners increase, foreigners will purchase more domestic products, causing exports to rise. Because net exports are one component of aggregate demand, this increase in net exports (exports minus imports) leads to an increase in aggregate demand at each price level.

Frictional unemployment

occurs because job seekers and employers need time to find one another.

trade surpluses

arise when a country's exports of goods and services exceed its imports.

Trade deficits

arise when a country's imports of goods and services exceed its exports.

Structural unemployment

arises from a mismatch between the jobs available in some labor markets and the skills of workers.

The loanable funds market

includes all saving and borrowing by business, households, governments, and foreigners.

The goods and services market

includes only purchases of domestically made goods or services by consumers for consumption, business investment purchases, government purchases, or foreigners buying exports.

A contraction

is a period during which an economy's real GDP decreases.

resource market

is used when businesses purchase land, labor, or capital from households, such as hiring households for employment or renting or leasing buildings.

The foreign exchange market

is where individuals exchange one currency for another.

Total unemployment

sum of frictional, structural, and cyclical unemployment

nominal wage

the dollar amount of the wage paid

Cyclical unemployment

the form of unemployment associated with business cycles.

real wage

the nominal wage adjusted for changes in the price level