March 17, 2018 

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LAW OF DEMAND: The inverse relationship between demand price and the quantity demanded, ceteris paribus. This fundamental economic principle indicates that as the price of a commodity decreases, then the quantity of the commodity that buyers are able and willing to purchase in a given period of time, if other factors are held constant, increases. This law is incredibly important to the study of economics. If you compiled a top ten list of economically important laws, the law of demand would be right there at the top.

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Lesson 16: Aggregate Shocks | Unit 2: Extension Page: 5 of 21

Topic: Self-Correction <=PAGE BACK | PAGE NEXT=>

The aggregate market has a perpetual inclination to adjust from short-run equilibrium to long-run equilibrium.
  • The aggregate market self-correction mechanism relies on wages, the key production cost determinant.
  • Short-run labor market imbalances induce wage changes that move the aggregate market to long-run equilibrium.

A recessionary gap Unemployment causes lower wages and production costs, and an increase in short-run aggregate supply.

An inflationary gap Labor market imbalances increase wages and production cost, and decrease in short-run aggregate supply.

Long run equilibrium is restored in both cases.

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An economy that engages in international trade, especially one that exports goods and services to, and imports goods and services from, other economies that make up its foreign sector. It is "open" in the sense that goods and services flow into and out of the country. The alternative to an open economy is a closed economy, one that does not engage in international trade.

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Today, you are likely to spend a great deal of time visiting every yard sale in a 30-mile radius seeking to buy either a case of blank recordable DVDs or a pair of red goulashes with shiny buckles. Be on the lookout for infected paper cuts.
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The penny is the only coin minted by the U.S. government in which the "face" on the head looks to the right. All others face left.
"If football taught me anything about business, it is that you win the game one play at a time."

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