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AFL-CIO: The umbrella organization for many labor unions in the United States, with AFL standing for American Federation of Labor, and CIO the abbreviation of Congress of Industrial Organizations. The AFL-CIO began as just the AFL in 1886 as a collection of craft unions representing skilled workers. It expanded to include semiskilled and unskilled workers represented by industrial unions. Differing interests among the two groups lead to a division of the original AFL in 1938 into two separate groups -- the AFL containing craft unions and CIO containing industrial unions. This rift was closed in 1955, when the AFL and CIO merged to form the AFL-CIO.

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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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MANAGED FLEXIBLE EXCHANGE RATE

An exchange rate control policy in which an exchange rate that is generally allowed to adjust to equilibrium levels through to the interaction of supply and demand in the foreign exchange market, but with occasional intervention by government. Also termed managed float or dirty float, most nations of the world currently use a managed flexible exchange rate policy. With this alternative an exchange rate is free to rise and fall, but it is subject to government control if it moves too high or too low. With managed float, the government steps into the foreign exchange market and buys or sells whatever currency is necessary keep the exchange rate within desired limits. This is one of three basic exchange rate policies used by domestic governments. The other two policies are flexible exchange rate and fixed exchange rate.

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Today, you are likely to spend a great deal of time at a crowded estate auction seeking to buy either a birthday greeting card for your father or a T-shirt commemorating the first day of spring. Be on the lookout for broken fingernail clippers.
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