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LERNER INDEX: The difference between price (p) and marginal cost (mc) as a fraction of price, that is [p-mc]/p. The Lerner index is usually taken as an indicator of market power because the larger the index, the larger the difference between price and marginal cost, that is, the larger the distance between the price and the competitive price. The Lerner index depends on the elasticity of demand. The Lerner index is also called the price-cost margin.
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INTEREST-RATE EFFECT A change in aggregate expenditures on real production, especially those made by the household and business sectors, that results because a change in the price level alters the interest rate which then affects the cost of borrowing. This is one of three effects underlying the negative slope of the aggregate demand curve associated with a movement along the aggregate demand curve and a change in aggregate expenditures. The other two are real-balance effect and net-export effect.
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PURPLE SMARPHIN
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Today, you are likely to spend a great deal of time at a dollar discount store trying to buy either a remote controlled World War I bi-plane or a wall poster commemorating Thor Heyerdahl's Pacific crossing aboard the Kon-Tiki. Be on the lookout for a thesaurus filled with typos.
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Post WWI induced hyperinflation in German in the early 1900s raised prices by 726 million times from 1918 to 1923.
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"You need just the right amount of ambition . . . If you have too little ambition, you don't push or work hard. If you have too much ambition, you put yourself ahead of others, elbow them out of your way. " -- Andy Grove, Intel chairman and co-founder
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IDA
International Development Association
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