Inflation: It is defined as the continuous rise in price of all the goods and services for a span of time in the economy. Gross Domestic Product (GDP): It is defined as the value of output which is produced domestically that is inside the borders of the country in the given interval of time. Aggregate Demand Curve ( AD ): It shows how price and the quantity demanded are related to each other. The curve is negatively slopped which means that when prices rise the quantity demanded falls. Aggregate Supply Curve ( AS ): It shows how price and the quantity supplied are related to each other. The curve is positively slopped which means that when prices rise, the quantity supplied also rises. The curve depends on the duration of time. Short Run Aggregate Supply ( SRAS ): It is a positively slopped curve in which supply increases when price rises. Long Run Aggregate Supply ( LRAS ): It is a vertical curve which is independent of time. When price increases there is no change in quantity supplied.

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Chapter 16, Problem 15P

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Concept Introduction:

Inflation: It is defined as the continuous rise in price of all the goods and services for a span of time in the economy.

Gross Domestic Product (GDP): It is defined as the value of output which is produced domestically that is inside the borders of the country in the given interval of time.

Aggregate Demand Curve (AD): It shows how price and the quantity demanded are related to each other. The curve is negatively slopped which means that when prices rise the quantity demanded falls.

Aggregate Supply Curve (AS): It shows how price and the quantity supplied are related to each other. The curve is positively slopped which means that when prices rise, the quantity supplied also rises. The curve depends on the duration of time.

Short Run Aggregate Supply (SRAS): It is a positively slopped curve in which supply increases when price rises.

Long Run Aggregate Supply (LRAS): It is a vertical curve which is independent of time. When price increases there is no change in quantity supplied.

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