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LEGAL RESERVES: The total amount of vault cash or Federal Reserve deposits of a bank. These are the only bank assets that can be used legally to satisfy reserve requirements.

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INTEREST-RATE EFFECT: A change in aggregate expenditures on real production, especially those made by the household and business sectors, that results because a change in the price level alters the interest rate which then affects the cost of borrowing. This is one of three effects underlying the negative slope of the aggregate demand curve associated with a movement along the aggregate demand curve and a change in aggregate expenditures. The other two are real-balance effect and net-export effect.

     See also | aggregate demand | aggregate demand curve | slope | aggregate expenditures | price level | money | purchasing power | real-balance effect | net-export effect | consumption expenditures | investment expenditures | government purchases | net exports | interest rate | investment borrowing | capital | durable good |


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INTEREST-RATE EFFECT, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2024. [Accessed: March 18, 2024].


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MARGINAL COST

The change in total cost (or total variable cost) resulting from a change in the quantity of output produced by a firm in the short run. Marginal cost (MC) indicates how much total cost changes for a given change in the quantity of output. Because changes in total cost are matched by changes in total variable cost in the short run (total fixed cost is fixed), marginal cost is the change in either total cost or total variable cost. It is found by dividing the change in total cost (or total variable cost) by the change in output. Marginal cost is one of four cost concepts used in short-run production analysis. The other three are average total cost, average fixed cost, and average variable cost.

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