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LOANS: In general, transactions in which legal claims are exchanged for money. The legal claim is typically a contract or promissory note stipulating when and how the money will be repaid. The lender gives up the money and receives the legal claim. The borrower gives up the legal claim and receives the money. A loan can be either an asset or a liability, depending on who does the borrowing and who does the lending. To the borrower, a loan is a liability, something that is owed. The borrower must pay off the loan or repurchase the legal claim. However, to the lender, a loan is an asset, something that is owned. In fact, loans represent a significant part of a bank's assets.

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Lesson 16: Aggregate Shocks | Unit 1: Instability Page: 1 of 21

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The aggregate market is a useful analysis for the study of the macroeconomy and its adjustments.
  • The aggregate market tends toward equilibrium.
Short-Run Equilibrium:
  • Intersection of AD and SRAS curves.
  • Expenditures on real output match production.
  • Labor market is prone to be out of equilibrium.
Long-Run Equilibrium:
  • Intersection of AD and LRAS curves.
  • Expenditures on real output match production.
  • Labor market in equilibrium.
Real world changes can be analyzed by examining how the aggregate market adjusts toward equilibrium.

To examine aggregate market adjustments we need to make use of the ceteris paribus concept.
  • The aggregate market curves, AD, LRAS, and SRAS, are constructed assuming other things remain unchanged.
  • The determinants of each curve, initially assumed constant, don't really stay unchanged, and they cause changes in the aggregate market.
  • The purpose of this aggregate market analysis is to help us to understand why the macroeconomy tends to be unstable, volatile and prone toward business cycles.

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Three factors that affect the numerical value of the price elasticity of demand and the price elasticity of supply--availability of substitutes, time period of analysis, and proportion of budget. The price elasticities of demand and/or supply for a good can change if these determinants change. The first two determinants are important to both price elasticity of demand and price elasticity of supply, while the third relates specifically to the price elasticity of demand.

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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 wall poster commemorating the first day of winter or blue cotton balls. Be on the lookout for malfunctioning pocket calculators.
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On a typical day, the United States Mint produces over $1 million worth of dimes.
"Look at the abundance all around you as you go about your daily business. You have as much right to this abundance as any other living creature. It's yours for the asking."

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