The change in consumption associated with a given change in income

The long-run aggregate supply curve is vertical at full employment because the economy has reached its capacity to produce

The short-run aggregate supply curve is positively sloped because many input costs are slow to change (sticky) in the short run

The change in saving associated with a given change in income

The output of goods and services (real GDP) demanded at different price levels

Households usually hold some of their wealth in financial assets such as savings accounts, bonds, and cash, and a rising aggregate price level means that the purchasing power of this monetary wealth declines, reducing output demanded

Occurs at the intersection of the shortrun aggregate supply and aggregate demand curves. At this output level, there are no net pressures for the economy to expand or contract

The real GDP that firms will produce at varying price levels. In the short run, aggregate supply is positively sloped because many input costs are slow to change (they are sticky), but in the long run, the aggregate supply curve is vertical at full employment because the economy has reached its capacity to produce

Spending changes alter equilibrium income by the spending change times the multiplier. One person’s spending becomes another’s income, and that second person spends some (the MPC), which becomes income for another person, and so on, until income has changed by 1/(1 − MPC) = 1/MPS. The multiplier operates in both directions

Results when a supply shock hits the economy, reducing short-run aggregate supply, and thus reducing output and increasing the price level

Results when aggregate demand expands so much that equilibrium output exceeds full employment output and the price level rises