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October 19, 2021 

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REQUIRED RESERVES: The amount of vault cash and/or Federal Reserve deposits that a bank must legally keep to back outstanding deposits. These are the assets that bank regulators specify a bank must have to ensure the stability of deposits and conduct daily transactions.

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Lesson Contents
Unit 1: The Concept
  • What It Is
  • Two Sides: SRAS
  • Two Sides: LRAS
  • Two Sides: AD
  • Two Traits
  • Unit 1 Summary
  • Unit 2: Equilibrium
  • Concept
  • Three Markets
  • Moving Target
  • Unit 2 Summary
  • Unit 3: Doing Curves
  • Long-Run Equilibrium
  • Long-Run Disequilibrium: Too High
  • Long-Run Disequilibrium: Too Low
  • Short-Run Equilibrium
  • Unit 3 Summary
  • Unit 4: Self Correction
  • Short Run
  • Recessionary Gap
  • Inflationary Gap
  • Unit 4 Summary
  • Unit 5: Policy Preview
  • Time
  • Time of Adjustment
  • Unit 5 Summary
  • Course Home
    Aggregate Market

    This lesson is devoted to the exposition of the aggregate market, which combines the aggregate demand curve and the two aggregate supply curves into two related models used to analyze the macroeconomy. The main focus of this lesson is on how each of the two models, one for the short run and one for the long run, achieve equilibrium. A key conclusion is that the short-run equilibrium does not necessarily correspond to the full-employment production achieved by the long-run equilibrium. This creates recessionary and inflation gaps, which correspond to the macroeconomic problems of unemployment and inflation.

    • In the first unit of this lesson we ponder the basics of the aggregate market, including the importance of aggregate demand, aggregate supply, the price level, real production, unemployment, and inflation.
    • Moving into the second unit, we review the concept of equilibrium and see how it relates to the aggregate market in both the short run and the long run.
    • The third unit analyzes short and long-run equilibrium by combining the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves.
    • The topic of self-correction is examined in the fourth unit, especially how automatic shifts of the short-run aggregate supply curve can eliminate recessionary and inflationary gaps.
    • The fifth and final unit of this lesson previews the use of the aggregate market to analyze business cycle stabilization policies, with particular emphasis on the time period of adjustment.

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    AVERAGE REVENUE CURVE, MONOPOLISTIC COMPETITION

    A curve that graphically represents the relation between average revenue received by a monopolistically competitive firm for selling its output and the quantity of output sold. Because average revenue is essentially the price of a good, the average revenue curve is also the demand curve for a monopolistically competitive firm's output.

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    APLS

    BROWN PRAGMATOX
    [What's This?]

    Today, you are likely to spend a great deal of time strolling through a department store hoping to buy either a coffee cup commemorating last Friday (you know why) or a wall poster commemorating the first day of spring. Be on the lookout for mail order catalogs with hidden messages.
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    This isn't me! What am I?

    Much of the $15 million used by the United States to finance the Louisiana Purchase from France was borrowed from European banks.
    "Think not of yourself as the architect of your career but as the sculptor. Expect to have to do a lot of hard hammering and chiseling and scraping and polishing. "

    -- B. C. Forbes, founder, Forbes magazine

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