when the point of short-run macroeconomic equilibrium is on the long-run aggregate supply curve.

the use of government purchases of goods and services, government transfers, or tax policy to stabilize the economy.

fiscal policy that increases aggregate demand.

an event that shifts the aggregate demand curve.

shows the relationship between the aggregate price level and the quantity of aggregate output supplied that exists in the short run, the time period when many production costs can be taken as fixed.

government programs intended to protect families against economic hardship.

the relationship for the economy as a whole between aggregate current disposable income and aggregate consumer spending.

the investment spending that businesses intend to undertake during a given period.

the amount of money a household would spend if it had no disposable income.

the factor by which a change in tax collections changes real GDP.

the aggregate price level in the short-run macroeconomic equilibrium.

shows how a household’s consumer spending varies with the household’s current disposable income.

occurs when aggregate output is above potential output.

shows the relationship between the aggregate price level and the quantity of aggregate output supplied in the economy.

an initial rise or fall in aggregate spending that is the cause, not the result, of a series of income and spending changes.

the change in consumer spending caused by the altered purchasing power of consumers’ assets.

the level of real GDP the economy would produce if all prices, including nominal wages, were fully flexible.

a tax of a fixed amount paid by all taxpayers, independent of the taxpayer’s income.

the factor by which a change in both spending and taxes changes real GDP.

fiscal policy that is the result of deliberate actions by policy makers rather than rules.

the value of the change in total inventories held in the economy during a given period.

the change in investment and consumer spending caused by altered interest rates that result from changes in the demand for money.

shows the relationship between the aggregate price level and the quantity of aggregate output supplied that would exist if all prices, including nominal wages, were fully flexible.

the combination of inflation and stagnating (or falling) aggregate output.

the increase in household savings when disposable income rises by $1.

model in which the aggregate supply curve and the aggregate demand curve are used together to analyze economic fluctuations.

the use of government policy to reduce the severity of recessions and rein in excessively strong expansions.

when the quantity of aggregate output supplied is equal to the quantity demanded.

when aggregate output is below potential output.

the sum of planned investment spending and unplanned inventory investment.

the percentage difference between actual aggregate output and potential output.

government spending and taxation rules that cause fiscal policy to be automatically expansionary when the economy contracts and automatically contractionary when the economy expands.

the dollar amount of the wage paid.

occurs when actual sales are lower than businesses expected, leading to unplanned increases in inventories; sales in excess of expectations result in negative unplanned inventory investment.

the ratio of the total change in real GDP caused by an autonomous change in aggregate spending to the size of that autonomous change; indicates the total rise in real GDP that results from each $1 of an initial rise in spending.

nominal wages that are slow to fall even in the face of high unemployment and slow to rise even in the face of labor shortages.

an event that shifts the short-run aggregate supply curve.

fiscal policy that reduces aggregate demand.

shows the relationship between the aggregate price level and the quantity of aggregate output demanded by households, businesses, the government, and the rest of the world.

the quantity of aggregate output produced in the short-run macroeconomic equilibrium.

the central bank’s use of changes in the quantity of money or the interest rate to stabilize the economy.

the increase in consumer spending when disposable income rises by $1.

describes the economy when shocks to aggregate demand affect aggregate output in the short run, but not the long run.