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January 17, 2022 

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RETURNS TO SCALE: Changes in production the occurs when all resources are proportionately increased in the long run. Returns to scale answers the question: If labor, capital, and ALL other inputs increase by 10%, does output increase by more than 10%, less than 10%, or exactly 10%? These answers indicate that returns to scale can take one of three forms: increasing returns to scale, decreasing returns to scale, and constant returns to scale.

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SUPPLY-SIDE ECONOMICS: A branch of economics that emphasizes the productive capabilities of resources, especially in the context of macroeconomic instability and economic growth. Supply-side economics became popular in the 1980s after several decades of Keynesian "demand-side" economics. Supply-side proponents contended that policies aimed at the demand-side alone, especially fiscal policies, was causing economic stagnation. One note result of supply-side economics was the developed of the aggregate market, which combined existing demand-side economics with the newly emerging focus on the supply-side.

     See also | supply-side policies | supply-management policies | conservative | fiscal policy | aggregate market | Keynesian economics |


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AGGREGATE MARKET SHOCKS

Disruptions of the equilibrium in the aggregate market (or AS-AD model) caused by shifts of the aggregate demand, short-run aggregate supply, or long-run aggregate supply curves. Shocks of the aggregate market are associated with, and thus used to analyze, assorted macroeconomic phenomena such as business cycles, unemployment, inflation, stabilization policies, and economic growth. The specific analysis of aggregate market shocks identifies changes in the price level (GDP price deflator) and real production (real GDP). Changes in the price level and real production have direct implications for the unemployment rate, the inflation rate, national income, and a host of other macroeconomic measures.

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