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April 22, 2018 

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LEGAL RESERVES: The total amount of vault cash or Federal Reserve deposits of a bank. These are the only bank assets that can be used legally to satisfy reserve requirements.

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Lesson 14: Aggregate Supply | Unit 5: Connections Page: 18 of 20

Topic: Self-Correction <=PAGE BACK | PAGE NEXT=>

The aggregate market has a self-correcting mechanism that ensures the long-run full-employment equilibrium will be reached by itself, without government policies.

The predicament:

  • Long run means full employment and flexible prices.
  • Short run means price rigidity without full employment.
The automatic, self-correcting solution:
  1. Disequilibrium in the labor market exerts pressure on wages to correct the imbalance, even with wage rigidity.
  2. This automatically moves us from the short run to the long run and full-employment equilibrium.
The critical question: How long does the self-correcting mechanism take? Days? Months? Years?

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ORDINAL UTILITY

The notion that utility--the satisfaction of wants and needs achieved through the consumption of goods and services--is measured by a ranking of preferences (first, second, third, etc.) that are only comparable on a relative basis. Ordinal utility does not presume that satisfaction is a measurable characteristic of a person, like height or weight, that can be compared against an established benchmark. The contrasting notion is cardinal utility, which is based on a numerical standard.

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APLS

YELLOW CHIPPEROON
[What's This?]

Today, you are likely to spend a great deal of time calling an endless list of 800 numbers seeking to buy either a package of blank rewritable CDs or yellow cotton balls. Be on the lookout for malfunctioning pocket calculators.
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The first paper notes printed in the United States were in denominations of 1 cent, 5 cents, 25 cents, and 50 cents.
"The vacuum created by failure to communicate will quickly be filled with rumor, misrepresentations, drivel and poison. "

-- C. Northcote Parkinson, historian

PWAC
Present Worth of Annual Costs
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