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AGGREGATE SUPPLY CURVE: A graphical representation of the relation between real production and the price level, holding all ceteris paribus aggregate supply determinants constant. There are actually two separate aggregate supply curves, one for the long run and one for the short run. These aggregate supply curves are one side of the graphical presentation of the aggregate market. The other side is occupied by the aggregate demand curve.

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Lesson 9: Macro Basics | Unit 2: Macro Problems Page: 6 of 16

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

Inflation is a stability problem that typically results because the four macro sectors of the economy demand more goods that the economy can produce.

Inflation problems:

  • Future prices become increasingly uncertain.
  • Financial assets like money, bank accounts, stocks and bonds decrease in value with higher prices.
  • Income and wealth are haphazardly redistributed because prices change at different rates.
  • Hyperinflation can reduce production because money becomes almost worthless and people revert to barter exchanges.

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INCOME EARNED BUT NOT RECEIVED

The three types of income earned but not received (IEBNR) by the factors of production are Social Security taxes, corporate profits taxes, and undistributed corporate profits. IEBNR is subtracted from national income to calculate personal income.

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The 1909 Lincoln penny was the first U.S. coin with the likeness of a U.S. President.
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