ECON 101 Chapter Notes - Chapter 20 : Gdp Deflator, Aggregate Supply, Aggregate Demand
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Document Summary
Fact 1: economic fluctuations are irregular and unpredictable. Are not regular, and are almost impossible to predict with much accuracy. Real gdp is the variable most commonly used to monitor short-run changes in the economy. Real gdp - measures the value of all final goods and services produced within a given period of time. Many macroeconomic variables fluctuate together, they fluctuate by different amounts. Changes in the economy"s output of goods and services are strongly correlated with changes in the economy"s utilization of its labor force. When real gdp declines, the rate of unemployment rises. Classical dichotomy - separation of variables into real variables and nominal variables. Real variables - those that measure quantities or relative prices. Nominal variables - those measured in terms of money. Changes in the money supply affect nominal variables but not real variables. The model of aggregate demand and aggregate supply. First variable - economy"s output of goods and services, as measured by real gdp.
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