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ECONOMIZE: The process of obtaining the most for the least. That is, to limit the cost of an action or to gain the greatest benefit from an activity. To economize also means to limit or prevent waste and inefficiency.

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Lesson 16: Aggregate Shocks | Unit 2: Extension Page: 4 of 21

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

Before getting to the graphs, here are four specific real-world-type issues to illustrate the direction that we're headed with our analysis of instability:
  • Increases in physical wealth, especially consumer durable goods and capital investment, which affect aggregate demand.
  • Changes in monetary policy that affect interest rates, which affect aggregate demand expenditures on durable goods and capital.
  • Technological advances that improve long-run and short-run aggregate supply.
  • Changes in wages and production costs that affect short-run aggregate supply.

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MARGINAL PROPENSITY TO SAVE

The proportion of each additional dollar of household income that is used for saving. The marginal propensity to save (abbreviated MPS) is another term for the slope of the saving line and is calculated as the change in saving divided by the change in income. The MPS plays a central role in Keynesian economics. It quantifies the saving-income relation, which is the flip side of the consumption-income relation, and thus it reflects the fundamental psychological law. It is also a critical to the multiplier process. A related saving measure is the average propensity to save.

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Potato chips were invented in 1853 by a irritated chef repeatedly seeking to appease the hard to please Cornelius Vanderbilt who demanded french fried potatoes that were thinner and crisper than normal.
"Now is the only time there is. Make your now wow, your minutes miracles, and your days pay. Your life will have been magnificently lived and invested, and when you die you will have made a difference."

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