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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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MACROECONOMIC PROBLEMS: Undesirable situations that exist in the macroeconomy, largely because one or more of the macroeconomic goals are not satisfactorily attained. The primary problems are unemployment, inflation, and stagnant growth. Macroeconomic theories are designed to explain why these problems emerge and to recommend corrective policies.

     See also | unemployment | inflation | macroeconomic sectors | macroeconomic markets | macroeconomic theories | macroeconomy | full employment | stability | economic growth | Unemployment | inflation | demand | production | scarcity | living standard | price level | purchasing power | money | uncertainty | contraction | business cycle | expansion | aggregate production | factors of production | labor | capital | land | entrepreneurship | investment expenditures | depreciation | regulation | technology | education | macroeconomics | macroeconomic goals | full employment | business cycles | business cycle phases | stability | economic growth | factors of production | contraction | expansion | potential real gross domestic product | shortage | surplus | circular flow | technology |


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FIXED INPUT

An input whose quantity cannot be changed in the time period under consideration. The relevant time period is usually termed the short run. The most common example of a fixed input is capital. The alternative to fixed input is variable input. A fixed input, such as capital, provides the "capacity" constraint for the short-run production of a firm. A variable input, such as labor, provides the means of changing short-run production. As larger quantities of a variable input are added to a fixed input, the variable input becomes less productive, which is the law of diminishing marginal returns.

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