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AGGREGATE MARKET ANALYSIS: An investigation of macroeconomic phenomena, including unemployment, inflation, business cycles, and stabilization policies, using the aggregate market interaction between aggregate demand, short-run aggregate supply, and long-run aggregate supply. Aggregate market analysis, also termed AS-AD analysis, has been the primary method of investigating macroeconomic activity since the 1980s, replacing Keynesian economic analysis that was predominant for several decades. Like most economic analysis, aggregate market analysis employs comparative statics, the technique of comparing the equilibrium after a shock with the equilibrium before a shock. While the aggregate market model is usually presented as a simply graph at the introductory level, more sophisticated and more advanced analyses often involve a system of equations.
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Lesson 4: Production Possibilities | Unit 5: Investment
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Page: 19 of 24
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Investment is the tradeoff between consumption goods used for current satisfaction and capital goods that expand future productive capabilities.- Investment is not just putting money into the stock market. Investment is giving up current satisfaction to obtain greater future production, usually seen as giving up consumption goods to produce capital goods.
- Education and human capital that increase the productive skills and ability of labor.
- Exploration for mineral or fossil fuel deposits that add to land resources.
- Scientific research that expands technology and resource quality.
- The downside of investment is risk. There is no guarantee that you'll get something tomorrow.
Let's consider this basic tradeoff between capital and consumption.- Capital and consumption are the two basic types of goods needed for investment. If we produce more calibrators (capital), then we give up some jogging shoes (consumption).
- This tradeoff IS the fundamental act of investment. In the graph to the right, if we move from bundle A to E to I, we are giving up jogging shoes and getting calibrators.
We are investing!
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AGGREGATE DEMAND CURVE A graphical representation of the relation between aggregate expenditures on real production and the price level, holding all ceteris paribus aggregate demand determinants constant. The aggregate demand (AD) curve is one side of the graphical presentation of the aggregate market. The other side is occupied by the long-run aggregate supply curve and/or the short-run aggregate supply curve. The negative slope of the aggregate demand curve captures the inverse relation between aggregate expenditures on real production and the price level. This negative slope is attributable to the interest-rate, real-balance, and net-export effects.
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BEIGE MUNDORTLE
[What's This?]
Today, you are likely to spend a great deal of time driving to a factory outlet looking to buy either a rechargeable battery for your cell phone or a T-shirt commemorating the 2000 Olympics. Be on the lookout for strangers with large satchels of used undergarments.
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This isn't me! What am I?
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Natural gas has no odor. The smell is added artificially so that leaks can be detected.
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"Don't be distracted by criticism. Remember the only taste of success some people have is when they take a bite out of you." -- Zig Ziglar
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JV
Joint Venture
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