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January 16, 2019 

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DEMAND PRICE: The maximum price that buyers would be willing and able to pay for a given quantity of a good. The emphasis here is on maximum. As a general rule buyers have an upper limit to the price that they would be willing to pay for a good. As an upper limit, they would gladly go lower.

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Lesson 16: Aggregate Shocks | Unit 5: Synthesis Page: 20 of 21

Topic: Business Cycles <=PAGE BACK | PAGE NEXT=>

To illustrate a business cycle, let's begin with long-run, full-employment equilibrium.
  • With an expansion, consumers have accumulated durable goods.
  • This decreases consumption spending and aggregate demand. The AD curve shifts leftward. We have a recession.
  • Before the SRAS curve automatically shifts to restore full employment, people start buying durable goods again and the AD curve shifts rightward. We have a recovery.
  • The AD curve doesn't stop at full employment. With our expansion we have (possibly) inflation.
  • But accumulation of durable goods causes a decrease in aggregate demand again and another recession.
  • The process continues.

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AGGREGATE SUPPLY DETERMINANTS

An assortment of ceteris paribus factors that affect short-run and long-run aggregate supply, but which are assumed constant when the short-run and long-run aggregate supply curves are constructed. Changes in any of the aggregate supply determinants cause the short-run and/or long-run aggregate supply curves to shift. While a wide variety of specific ceteris paribus factors can cause the aggregate supply curves to shift, they are commonly grouped into three broad categories--resource quantity, resource quality, and resource price.

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ORANGE REBELOON
[What's This?]

Today, you are likely to spend a great deal of time at a dollar discount store trying to buy either a really, really exciting, action-filled video game or a coffee cup commemorating the moon landing. Be on the lookout for slow moving vehicles with darkened windows.
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This isn't me! What am I?

Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
"Good humor is a tonic for mind and body. It is the best antidote for anxiety and depression. It is a business asset. It attracts and keeps friends. It lightens human burdens. It is the direct route to serenity and contentment."

-- Grenville Kleiser, Author

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