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AD-AS ANALYSIS: An economic model relating the price level and real production that is used to analyze business cycles, gross domestic product, unemployment, inflation, stabilization policies, and related macroeconomic phenomena. The AS-AD model, inspired by the standard market model, captures the interaction between aggregate demand (the buyers) and short-run and long-run aggregate supply (the sellers).

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Lesson 17: Money | Unit 5: Scarcity Page: 23 of 25

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

Money is critical to the production, consumption, and exchange activities that take place in a complex economy.
  • We could not have a complex economy without money.
  • Money is so important because it makes our system more efficient.
  • With money we can use our limited resources to provide more satisfaction of our unlimited wants and needs.

Two reasons:

  • First: Money improves efficiency by reducing the amount of resources that would be needed for barter exchanges.
  • Second: Money improves efficiency by letting resources specialize in production.

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PAYMENT FLOW

In the circular flow, the transfer of money in payment in exchange for the counter-clockwise physical flow of goods and services. The payment flow is the monetary payment for goods and services received by the household sector from the business sector through product markets and the monetary payment for resource services obtained by the business sector from the household sector through resource markets. The payment flow is usually illustrated as a clockwise flow for a model with the product markets at the top, resource markets at the bottom, household sector at the left, and business sector at the left. The physical flow moves in the opposite direction.

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APLS

ORANGE REBELOON
[What's This?]

Today, you are likely to spend a great deal of time looking for a downtown retail store trying to buy either a case of blank recordable DVDs or a pair of red goulashes with shiny buckles. Be on the lookout for slightly overweight pizza delivery guys.
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The first "Black Friday" on record, a friday marked by a major financial catastrophe, occurred on September 24, 1869 -- A FRIDAY -- when an attempted cornering of the gold market induced a financial crises and economy-wide depression.
"The greatest things ever done on Earth have been done little by little. "

-- William Jennings Bryan

MC
Marginal Cost
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