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AGGREGATE MARKET ANALYSIS: An investigation of macroeconomic phenomena, including unemployment, inflation, business cycles, and stabilization policies, using the aggregate market interaction between aggregate demand, short-run aggregate supply, and long-run aggregate supply. Aggregate market analysis, also termed AS-AD analysis, has been the primary method of investigating macroeconomic activity since the 1980s, replacing Keynesian economic analysis that was predominant for several decades. Like most economic analysis, aggregate market analysis employs comparative statics, the technique of comparing the equilibrium after a shock with the equilibrium before a shock. While the aggregate market model is usually presented as a simply graph at the introductory level, more sophisticated and more advanced analyses often involve a system of equations.
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Lesson Contents
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Unit 1: Adjustments |
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Unit 2: Determinants |
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Unit 3: Single Shifts |
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Unit 4: Double Shifts |
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Unit 5: Cause and Effect | |
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Market Shocks
Our goal in this lesson is to investigate disruptions of the market. Specifically, we want to use the market model previously developed, to examine the why and how of market shocks. What causes market shocks? How to markets react when shocked? These are just a few of the questions we want to consider. If the truth be known, markets in the real world don't remain at the same locations for very long. They move. They adjust. Prices change. Quantities change. We can understand these real world market changes, by analyzing what happens to market model when it's shocked. - The first unit of this lesson lays the foundation of analyzing market shorts with an overview of the adjustment process and the particular role played by the ceteris paribus assumption.
- In the second unit, we review the five determinants of demand and five determinants of supply, because these are the are what cause market disruptions.
- We then move into the actual adjustment process in the third unit, examining the four basic disruptions involving a shift in either the demand or supply curve.
- The fourth unit builds on these four basic shifts to exam four complex shifts that have simultaneous shifts in both the demand and supply curves.
- We end this lesson in the fifth unit by relating these market shocks to the fundamental notion of cause and effect inherent in the study of economic science.
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GOVERNMENT EXPENDITURES Spending by the government sector including both the purchase of final goods and services, or gross domestic product, and transfer payments. Government expenditures are used by the government sector to undertake key functions, such as national defense and education. These expenditures are financed with a combination of taxes and borrowing.
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PINK FADFLY
[What's This?]
Today, you are likely to spend a great deal of time at a dollar discount store wanting to buy either a coffee cup commemorating the 1960 Presidential election or a how-to book on fixing your computer, with illustrations. Be on the lookout for malfunctioning pocket calculators.
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This isn't me! What am I?
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Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
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"The will to win is important, but the will to prepare is vital. " -- Joe Paterno, football coach
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ARCH
Autoregressive Conditional Heteroskedasticity
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