March 23, 2018 

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REAL: The value after adjusting for inflation. Pointy-headed economist are frequently interested in comparing stuff (production, income, or whatever) in one year with similar stuff in another year. However, in that inflation can distort such a comparison, it's best made using a fixed set of prices that eliminate inflationary changes. In practice, this is accomplished by using the prices in an arbitrary "base year." Once the price differences have been eliminated, the numbers are said to be measured in real dollars.

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Lesson 15: Aggregate Market | Unit 5: Policy Preview Page: 20 of 22

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

It takes time to move the economy from short run equilibrium to long run equilibrium.

Two options:

  • Wait for self-correcting mechanism --> A short-run imbalance in the labor market eventually triggers the steps that move the economy to full-employment production and long-run equilibrium.
  • Take immediate steps --> Induced shifts in the AD, SRAS, LRAS curves that would, presumably reach full employment faster than the self-correcting mechanism.

The critical questions remains:

  • How much time is needed to adjust from the short run to the long run?

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The change in total cost (or total variable cost) resulting from a change in the quantity of output produced by a firm in the short run. Marginal cost (MC) indicates how much total cost changes for a given change in the quantity of output. Because changes in total cost are matched by changes in total variable cost in the short run (total fixed cost is fixed), marginal cost is the change in either total cost or total variable cost. It is found by dividing the change in total cost (or total variable cost) by the change in output. Marginal cost is one of four cost concepts used in short-run production analysis. The other three are average total cost, average fixed cost, and average variable cost.

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Today, you are likely to spend a great deal of time at a crowded estate auction 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 small children selling products door-to-door.
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The earliest known use of paper currency was about 1270 in China during the rule of Kubla Khan.
"It is not the straining for great things that is most effective; it is the doing of the little things, the common duties, a little better and better."

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