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Phillips Curve and Supply Shocks definitions

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  • Supply Shock
    An unexpected event causing input prices to change, impacting firms' production costs and shifting aggregate supply.
  • Short-Run Aggregate Supply
    A curve representing the total output firms produce at various price levels in the short term, sensitive to input price changes.
  • Phillips Curve
    A graphical representation showing the relationship between inflation rate and unemployment rate in an economy.
  • Input Prices
    Costs of resources like gasoline used by firms to produce goods, which can fluctuate unexpectedly and affect supply.
  • GDP
    The total value of goods and services produced within a country, often affected by shifts in aggregate supply.
  • Price Level
    A measure indicating the average prices of goods and services in an economy, rising during supply shocks.
  • Inflation
    A sustained increase in the general price level, often resulting from supply shocks and decreased aggregate supply.
  • Unemployment
    The proportion of the labor force without jobs, which rises when GDP falls due to supply shocks.
  • Trade-Off
    A situation where reducing one economic problem, like unemployment, worsens another, such as inflation.
  • Equilibrium
    A state where economic forces are balanced, disrupted by supply shocks that shift aggregate supply and Phillips curve.
  • Aggregate Supply
    The total output of goods and services available in an economy at different price levels.
  • Policymakers
    Individuals or groups responsible for managing economic issues like inflation and unemployment during supply shocks.
  • Double Jeopardy
    A scenario where both inflation and unemployment rise simultaneously, complicating economic management.
  • Short-Run Phillips Curve
    A curve illustrating the inverse relationship between inflation and unemployment, shifting right during supply shocks.
  • Market Equilibrium
    A condition where supply and demand are balanced, challenged by supply shocks that cause instability.