AP®︎ Macroeconomics: Topic 3.7 Flashcards

Master key terms and definitions for Topic 3.7 of AP Macroeconomics – Long-Run Self-Adjustment to help you prep for quizzes and the AP exam.

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Term

Long-Run Equilibrium

Definition

The point where AD, SRAS, and LRAS intersect at full-employment output.

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Long-Run Equilibrium
Not Started

The point where AD, SRAS, and LRAS intersect at full-employment output.

MOD-2.IMOD-2.I.1
Recessionary Gap and Self-Correction
Not Started

Output is below full employment; wages fall, SRAS shifts right, and output returns to potential.

MOD-2.IMOD-2.I.1
Inflationary Gap and Self-Correction
Not Started

Output is above full employment; wages rise, SRAS shifts left, and output returns to potential.

MOD-2.IMOD-2.I.1
Natural Rate of Unemployment
Not Started

The unemployment rate that exists when the economy is producing at full-employment output.

MOD-2.IMOD-2.I.1
Aggregate Demand Shock in the Long Run
Not Started

A shift in demand changes output and employment temporarily, but long-run output returns to potential.

MOD-2.IMOD-2.I.1
Short-Run Aggregate Supply Shock in the Long Run
Not Started

A temporary supply shift changes output and prices short run, then wage adjustment restores potential output.

MOD-2.IMOD-2.I.1
Permanent Negative Supply Shock
Not Started

A lasting drop in productivity or resources shifts LRAS and SRAS left, lowering potential output.

MOD-2.IMOD-2.I.2
Long-Run Self-Adjustment
Not Started

Flexible wages and prices shift SRAS until output returns to full-employment real GDP.

MOD-2.IMOD-2.I.1
Long-Run Aggregate Supply Shift and Economic Growth
Not Started

Changes in resources, technology, or productivity shift potential output and show long-run economic growth.

MOD-2.IMOD-2.I.2
Permanent Positive Supply Shock
Not Started

A lasting increase in productivity or resources shifts LRAS and SRAS right, raising potential output.

MOD-2.IMOD-2.I.2