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MACRO GOALS: The three goals of a mixed economy that are most relevant to the study of macroeconomics are full employment, stability, and economic growth. Full employment is the condition in which all of the economy's available resources are engaged in the production of goods and services. Stability is the condition in which the economy avoids large changes in production, employment, and especially prices. Economic growth is the condition in which the economy's production possibilities are expanding over time.

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Lesson 13: Aggregate Demand | Unit 3: The Curve Page: 11 of 22

Topic: Slope <=PAGE BACK | PAGE NEXT=>

The aggregate demand curve has a negative slope.
  • This negative slope means that households, business, government and foreign sectors are inclined to increase their aggregate spending on real production if the price level decreases and decrease spending if the price level rises.
Three reasons:
  • The real-balance effect.
  • The interest-rate effect.
  • The net-export effect.

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AGGREGATE DEMAND SHIFTS

Changes in the aggregate demand determinants cause the aggregate demand curve to shift. The mechanism is comparable to that for market demand determinants and market demand. There are two alternatives--an increase in aggregate demand and a decrease in aggregate demand. An increase in spending by any of the four sectors--household, business, government, and foreign--shifts the aggregate demand curve to right. A decrease in spending by these four sectors shifts the aggregate demand curve to left.

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BLACK DISMALAPOD
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Today, you are likely to spend a great deal of time wandering around the shopping mall trying to buy either a weathervane with a horse on top or a case of blank recordable DVDs. Be on the lookout for crowded shopping malls.
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The average length of a "business lunch" is about 36 minutes.
"Defeat is simply a signal to press onward."

-- Helen Keller, lecturer, author

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