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AEA: The abbreviation for, the American Economic Association, an organization of over 25,000 professional economists. Founded in 1885, this premier top-of-the-economic-association-list publishes the prestigious American Economic Review, arguably THE number one scholarly U.S. economic journal and the Journal of Economic Literature, arguably THE number one index of economic journal publications. The AEA, as acronymically inclined economists call it, also sponsors an annual conference where professional economists present scholarly papers on their latest scholarly research.

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Lesson 13: Aggregate Demand | Unit 3: The Curve Page: 15 of 22

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  • The basic setup, shape, and position of the aggregate demand curve on a graph. The AD curve shows the negative relationship between the price level and real GDP.
  • What causes the negative slope of the AD curve--namely: 1) the real-balance effect, 2) the interest-rate effect, and 3) the net-export effect.
  • Why the real-balance effect means that a higher (or lower) price level reduces (or increases) the purchasing power of money, resulting in less (or more) real production purchased.
  • Why the interest-rate effect means that a higher (or lower) price level leads to higher (or lower) interest rates and thus a higher (or lower) cost of borrowing which decreases (or increases) consumption and investment expenditures on real production.
  • Why the net-export effect means that a higher (or lower) price level decreases (or increases) exports and increases (or decreases) imports thus decreasing (or increasing) net export expenditures on real production.

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DEMAND

The willingness and ability to buy a range of quantities of a good at a range of prices, during a given time period. Demand is an inverse relation between price (demand price) and quantity (quantity demanded). Demand is one half of the market exchange process--the other is supply. This demand side of the market draws inspiration from the unlimited wants and needs dimension of the scarcity problem.

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Today, you are likely to spend a great deal of time at a going out of business sale hoping to buy either a rechargeable battery for your cell phone or a T-shirt commemorating the 2000 Olympics. Be on the lookout for cardboard boxes.
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Ragnar Frisch and Jan Tinbergen were the 1st Nobel Prize winners in Economics in 1969.
"As the births of living creatures at first are ill-shapen, so are all innovations, which are the births of time. "

-- Sir Francis Bacon, philosopher

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