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12.6: Key Terms

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    180852
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    contractionary fiscal policy
    tax increases or cuts in government spending designed to decrease aggregate demand and reduce inflationary pressures
    coordination argument
    downward wage and price flexibility requires perfect information about the level of lower compensation acceptable to other laborers and market participants
    disposable income
    income after taxes
    expansionary fiscal policy
    tax cuts or increases in government spending designed to stimulate aggregate demand and move the economy out of recession
    expenditure multiplier
    Keynesian concept that asserts that a change in autonomous spending causes a more than proportionate change in real GDP
    inflationary gap
    equilibrium at a level of output above potential GDP
    macroeconomic externality
    occurs when what happens at the macro level is different from and inferior to what happens at the micro level; an example would be where upward sloping supply curves for firms become a flat aggregate supply curve, illustrating that the price level cannot fall to stimulate aggregate demand
    menu costs
    costs firms face in changing prices
    Phillips curve
    the tradeoff between unemployment and inflation
    real GDP
    the amount of goods and services actually sold in a nation
    recessionary gap
    equilibrium at a level of output below potential GDP
    sticky wages and prices
    a situation where wages and prices do not fall in response to a decrease in demand, or do not rise in response to an increase in demand

    12.6: Key Terms is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.

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