AP Macroeconomics-Module 14 and 15
Study Guide
real wage - Answer-The wage rate divided by the price level
real income - Answer-Income divided by the price level
inflation rate - Answer-The annual percent change in a price index--typically the consumer price index. The
inflation rate is positi...
real wage - Answer✔✔-The wage rate divided by the price level
real income - Answer✔✔-Income divided by the price level
inflation rate - Answer✔✔-The annual percent change in a price index--typically the consumer price index. The
inflation rate is positive when the aggregate price level is rising (inflation) and negative when the aggregate price
level is falling (deflation).
shoe-leather costs - Answer✔✔-(of inflation) The increased costs of transactions caused by inflation
menu costs - Answer✔✔-The real cost of changing a listed price
unit-of-account costs - Answer✔✔-(of inflation) Costs arising from the way inflation makes money a less reliable
unit of measurement
nominal interest rate - Answer✔✔-The interest rate actually paid for a loan, not adjusted for inflation
real interest rate - Answer✔✔-The nominal interest rate minus the inflation rate
disinflation - Answer✔✔-The process of bringing down inflation that has become embedded in expectations
aggregate price level - Answer✔✔-A measure of the overall level of prices in the economy
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