Demand-pull inflation is caused by increased demand, while cost-push inflation is caused by decreased supply due to increased costs.

Nominal variables are measured in monetary units, while real variables are adjusted for inflation and measure actual quantities.

Fiscal policy involves government spending and taxation, while monetary policy involves managing the money supply and interest rates.

Demand-pull inflation is caused by excess demand, while cost-push inflation is caused by rising production costs.

Demand-pull inflation can be addressed with contractionary policies, while cost-push inflation is more difficult to address and may require supply-side policies.

In the short run, monetary policy can affect both nominal and real variables, while in the long run, it primarily affects nominal variables according to monetary neutrality.

Lowering the reserve ratio allows banks to lend out more of their deposits, while lowering the discount rate makes it cheaper for banks to borrow from the Fed.

Price level is the average of current prices across the entire spectrum of goods and services in the economy. Real GDP is inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year.

AD is the total demand for goods and services in an economy at a given price level and time period. SRAS is the total supply of goods and services that firms plan to sell at a given price level and time period.

The equilibrium price level is the price at which the quantity of goods supplied equals the quantity of goods demanded. The equilibrium output is the quantity of goods and services produced at the equilibrium price level.

The AD curve shifts to the right, increasing both price level and real GDP.

The SRAS curve shifts to the left, increasing price levels but decreasing real GDP.

The AD curve shifts right, and the SRAS curve shifts left, resulting in higher price levels with little change in real GDP.

The short-run equilibrium price level and output.

The intersection of AD, SRAS, and LRAS curves.

An increase in aggregate demand, potentially leading to demand-pull inflation.

A decrease in short-run aggregate supply, potentially leading to cost-push inflation.

It shifts the AD curve to the right.

Price level increases, and output decreases.

Shift the AD curve to the right, showing a new short-run equilibrium with a higher price level and a higher output.

A rise in the general price level in an economy.

Inflation caused by increased consumer demand shifting the AD curve to the right.

Inflation caused by decreased production due to increased input costs or supply shocks shifting SRAS left.

A self-perpetuating cycle where demand-pull and cost-push inflation reinforce each other.

The idea that changes in the money supply only affect nominal variables, not real variables.

How quickly money is spent and re-spent in an economy.

Theory stating that at a constant velocity and GDP, an increase in the money supply leads to a proportional increase in prices.

The buying and selling of government bonds by the Federal Reserve to influence the money supply.

The fraction of a bank's deposits that it is required to keep in reserve.

The interest rate at which commercial banks can borrow money directly from the Fed.