ECON 104 Final: ECON STUDY GUIDE FINAL

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Economic growth- an increase in output (real gdp), an expansion of production possibilities. Nominal gdp- the total value of goods and services produced within a nations borders, measured in current prices. Current dollar value of output- that is, avg. price level multiplied by the quantity of goods ands ervices produced. Increase in nominal can results from either increases in price level or increases in quantity of output. Real gdp- the inflation-adjusted value of gdp; the value of output measured in constant prices. Refers to actual quantity of goods and services produced. Real gdp avoids the distortions of inflation by valuing output in constant prices. To achieve large and lasting increases in output we must push our production possibilities outward. Economic growth-sustained increases in total output-is possible only if the as curve shifts rightward. Short run macro policy uses shifts of the aggregate demand curve to achieve economic stability.

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