Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.

Question

business fluctuations recession aggregate demand curve Solow growth rate long-run aggregate supply curve real shock aggregate demand shock short-run aggregate supply curve nominal wage confusion menu costs

the costs of changing prices. (also called a productivity shock) any shock that increases or decreases the potential growth rate. all the combinations of inflation and real growth that are consistent with a specified rate of spending growth . shows the positive relationship between the inflation rate and real growth during the period when prices and wages are sticky. the short-run movements in real GDP around its long-term trend. situation that occurs when workers respond to their nominal wage instead of to their real wage. a significant, widespread decline in real income and employment. is a rapid and unexpected shift in the AD curve (spending). a vertical line at the Solow growth rate. an economy’s potential growth rate, the rate of economic growth that would occur given flexible prices and the existing real factors of production.

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