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ADJUSTMENT, SHORT-RUN AGGREGATE MARKET: Disequilibrium in the short-run aggregate market induces changes in the price level that restore equilibrium. If the price level is above the short-run equilibrium price level, economy-wide product market surpluses cause the price level to fall. If the price level is below the short-run equilibrium price level, economy-wide product market shortages cause the price level to rise. In both cases short-run equilibrium is restored. You might want to compare adjustment, long-run aggregate market. Price level changes induce changes in both aggregate expenditures and real production. Unlike the long-run aggregate market, changes in the price level can induce changes in short-run aggregate supply, making it greater or less than full-employment real production.

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Lesson 4: Production Possibilities | Unit 5: Investment Page: 22 of 24

Topic: Bundle Choices: I <=PAGE BACK | PAGE NEXT=>

Now with bundle I (270 jogging shoes and 8 calibrators).
  • Producing 8 calibrators has added even more to the economy's capital.
  • The cost of these 8 calibrators is 180 pairs of shoes compared to A, and the extra 4 calibrators compared to bundle E is 140 pairs of shoes.
  • These 8 calibrators have increased the quantity of resources even more than bundle E, leading to an even greater shift of production possibilities curve.
  • Tomorrow's production possibilities curve is even farther out than today's curve. There is more growth and a bigger shift in the curve.

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KEYNESIAN ECONOMICS

A theory of macroeconomics developed by John Maynard Keynes based on the proposition that aggregate demand is the primary source of business-cycle instability and the most important cause of recessions. Keynesian economics points to discretionary government policies, especially fiscal policy, as the primary means of stabilizing business cycles and tends to be favored by those on the liberal end of the political spectrum. The basic principles of Keynesian economics were developed by Keynes in his book, The General Theory of Employment, Interest and Money, published in 1936. This work launched the modern study of macroeconomics and served as a guide for both macroeconomic theory and macroeconomic policies for four decades. Although it fell out of favor in the 1980s, Keynesian principles remain important to modern macroeconomic theories, especially aggregate market (AS-AD) analysis.

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APLS

BLACK DISMALAPOD
[What's This?]

Today, you are likely to spend a great deal of time browsing through a long list of dot com websites wanting to buy either pink cotton balls or a genuine down-filled comforter. Be on the lookout for slightly overweight pizza delivery guys.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
"If things are not going well with you, begin your effort at correcting the situation by carefully examining the service you are rendering, and especially the spirit in which you are rendering it."

-- Roger Babson, statistician and columnist

IIP
Index of Industrial Production
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