aggregate demand  the total demand for goods and services by consumers, businesses, government, and foreigners.
aggregate supply  the total value of all goods and services produced in the economy by the available supply of capital, labor, and technology (also called potential GDP).
capital  the factories, improvements to cultivated land, machinery and other tools, equipment, and structures used to produce goods and services.
economic fluctuations  swings in real GDP that lead to deviations of the economy from its long-term growth trend.
economic growth   an upward trend in real GDP, reflecting expansion in the economy over time.
expansion  the period between the trough of a recession and the next peak, consisting of a general rise in output and employment.
inflation rate  the percentage increase in the overall price level over a given period of time, usually one year.
interest rate  the amount received per dollar loaned per year, usually expressed as a percentage (e.g., 6 percent) of the loan.
labor  the number of hours people work in producing goods and services.
nominal interest rate  the interest rate uncorrected for inflation.
peak  the highest point in real GDP before a recession.
potential GDP  the economy’s long-term growth trend for real GDP determined by the available supply of capital, labor, and technology. Real GDP fluctuates above and below potential GDP.
production function  the relationship that describes output as a function of labor, capital, and technology.
real gross domestic product (real GDP)  a measure of the value of all the goods and services newly produced in a country during some period of time, adjusted for inflation.
real interest rate  the interest rate minus the expected rate of inflation; it adjusts the nominal interest rate for inflation.
recession  a decline in real GDP that lasts for at least six months.
recovery  the early part of an economic expansion, immediately after the trough of the recession.
technology  anything that raises the amount of output that can be produced with a given amount of labor and capital.
trough  the lowest point of real GDP at the end of a recession.
unemployment rate  the percentage of the labor force that is unemployed.