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POTENTIAL REAL GROSS DOMESTIC PRODUCT: The total real output (real gross domestic product) that the economy could produce if resources are fully employed. In other words, the economy is operating ON the production possibilities frontier. Full employment is generally indicated by achieving what is termed the natural unemployment rate, which is an unemployment rate in the neighborhood of about 5%. If the economy is at full employment then actual gross domestic product is equal to potential gross domestic product and the actual unemployment rate is equal to the natural unemployment rate. The macroeconomy is thus living up to its potential, at least in terms of producing wants-and-needs satisfying goods and services.

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by Orley M. Amos, Jr.
Professor of Economics
Oklahoma State University
Go to: Chapter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Chapter Four: Tyler's Second Test

Tyler adjusted his glasses, then hoisted the bags of fruit onto his shoulders. While apprehensions remained, he saw no alternative but to continue. The path awaited. In fact, as he walked past the umbrella trees, winding his way down yet another one of the perpetual turns in the orange path, he realized that he was growing accustomed to this strange environment. He was not even startled when the flying frog suddenly fluttered to a perch on a glowing green stick plant only a few feet away.

He began to understand how special this lesson in economics must be. And that made him feel special as well. If the professor was correct, he was one of the few people in the world privileged enough to undertake this lesson. Had others in his class taken this lesson? Certainly not! Perhaps only kings, presidents, and heads of states were so privileged. Of course, such must be true. This was a special lesson, nothing for mere mortals. This was a lesson for special people.

The thought made Tyler hold his head a little higher, and it put a little spunk in his walk. He was numb from lack of sleep. He remained anxious about what adventure lay ahead. But he was special.

After leaving the patch of purple fruit, Tyler walked for over an hour, lugging both fruit packed bags. While the fruit was certainly lighter than the jewels, it remained quite a burden. The burden and the walking made Tyler quite thirsty. He ate a piece of the juicy purple fruit, letting the tasty liquid slide down his throat, but thirst-quenching water it was not. Thirst became his most pressing desire. With each step, he scanned his peculiar environment for some sign, any sign, of water.

The foliage along side the path was now thick, but not impenetrable. Thoughts of hideous monsters made him hesitant to venture off the trail, but thirst overcame his fears. Every few meters, Tyler stepped from the now familiar orange route and plunged into the dense foliage. But no water was to be found.

Ironic thoughts invaded his exhausted, thirst-starved brain. To die of dehydration in this alien land, forced into this extra credit exercise by a clearly deranged professor, when all he sought was a little assistance on his studies.

To perish for the sake of a better grade!

The winged amphibian kept pace with Tyler. It jumped and fluttered from one green stick plant to another along the passage. From time to time, it too would disappear into the depth of the trees. As the hours passed, this frog had become welcomed companion. Each time it was out of sight, doing who knows what in the trees, Tyler felt anxiously alone. Upon its return, Tyler's apprehensions faded.

A strange sensation, indeed!

This beastly feline-frog, however, seemed totally unaware of, or at least unconcerned with, Tyler's presence. It was as though both human and creature were coincidently be travelling in the same direction, along the same route, in the same land. Occasionally Tyler attempted a casual, but direct conversation. "Hi, frog-cat thing," Tyler would remark. But the frog thing gave no sign of recognition, no response, no acknowledgement of Tyler's presence. Tyler's weary brain wondered if he had only imagined this thing's participation in the apparent conversation earlier that day.

Tyler's water searching was futile, but not totally fruitless. By midday, he stumbled across a sign much like the one he had seen at the day before. It read:

ECONOMICS
Test #2
100 meters

"Well, here we go again," Tyler said to the frog, expecting no respond and getting none. "Let's get this test going," he continued his one-sided conversational monologue.

Tyler was more confident as he sauntered down the pathway toward his second exam than he had been for the first. Almost gone were thoughts of gruesome student-eating monsters. Visions of his gnarled, bloodied body come to mind no more than once, perhaps twice. Tyler knew what to expect and how to play this absurd game.

Tyler trekked down the winding path to meet his second test. The burden of fruit he carried was lighten somewhat by his confidence. Thirsty or not, he had a definite bounce in his step as he briskly rounded a small hairpin curve. In the tight confines of the path, he could not avoid bumping into the another one of the monkey-rabbit creatures.

"Excuse me," Tyler said politely. "I'm sorry, I didn't see you."

"Quite all right, Mr. Martin," the creature said bouncing back to his feet, "I knew you were approaching. I should have been more observant."

When Tyler realized that this was the same long-eared primate instructor who had administered the first test, Tyler grew even more confident.

"Are you doing my second test, too?" Tyler asked hopefully.

"Yes, I am," he said brushing the orange dirt from his green clothes. "I trust you'll do better on this time."

More than a little embarrassed, Tyler said, "But, I figured out scarcity. And... and I know what an opportunity cost is now." Then Tyler's heart sank a little as he recalled the pile of jewels left behind.

"Yes, indeed you did," the instructor said thumping one of Tyler's fruit-filled bags, "And, the rod was a very good idea. Few students have discovered that option. Expanding capital. Yes, that's definitely a plus. Professor Francis should be pleased." Then after a short pause he said, "We must get on with it, I have a great deal of work to do."

"Okay," Tyler smiled confidently, pleased with the instructor's approval. As he lowered the bags, he said "Uhm... before we start... I'm... uh... awfully thirsty. Is there any way I can get a drink of water?"

"Water?" the instructor asked defensively.

"Yes, uh... water," Tyler reiterated.

"Was there no water along your route?" the instructor asked, but already knowing the answer.

Tyler shook his head, "No. The fruit was juicy, but I haven't had a drink of water in over a day. I'm awfully thirsty."

"Water is not part of your lesson, Mr. Martin," the instructor said thinking that would put an end to the discussion.

But Tyler continued, "I'd be willing to trade some of this fruit for a drink of water. Please."

"My dear Mr. Martin..." the instructor began.

I don't know how much longer I can go without water," Tyler said rubbing his parched throat.

"Well..." the instructor thought for a moment. "No, sorry. I am not supposed to stray from your lesson."

Tyler silently rubbed his throat again.

"But you would be willing to trade fruit for the water?" the instructor asked.

Tyler nodded eagerly.

"Very well. I shouldn't, however..." the instructor slipped into the foliage and returned with a purple pouch, similar to, but much smaller than the two bags Tyler carried. He offered it to Tyler.

Tyler anxiously grabbed the pouch.

"This is my own, personal supply. One drink," the instructor said, leaving no room for negotiation.

Tyler put the opening of the pouch to his lips and started to drink. But before he had even a mouthful of water, the instructor screamed, "Enough!"

Tyler reluctantly gave the pouch back to the instructor, then began to open one of his fruit bags to fulfill his part of the bargain. "How many pieces for the drink?" he asked.

"None," the instructor said, shuddering slightly.

"None?" Tyler repeated.

"Your offer was payment enough," he said as he tucked the pouch of water out of sight. "I do not desire your fruit."

Confused, Tyler closed the bag and secured the strap.

"Now your first question," the instructor began, "What is a market?"

Tyler paused as his thoughts were brought back to the test. His quench thirst relaxed him and let his mind easily search back through the professor's lectures and the textbook for an answer to this question. The answer came surprisingly easily.

"A market is a method of exchanging goods and services between buyers and sellers. Some people produce, or otherwise have possession of a good, and they voluntarily sell it to other people who want it and are willing to pay. A market enables the exchange a good between the two groups." He nodded confidently towards the ambivalent frog-cat perched a few feet away.

"Excellent answer Mr. Martin," The instructor said, scribbling on his clipboard. "Now, what is the law of demand?"

Tyler's comprehension of economics had apparently reached an all time high. He quickly and effortlessly answered the second question. "The law of demand states that the price of a good and the quantity demanded are inversely related. In other words, if the price of a good increases, then the quantity of the good demanded decreases, ceteris paribus. Ceteris paribus means, of course, that other factors that might affect demand remain unchanged." Tyler beamed.

"Very good, Mr. Martin," the instructor said, again marking on his clipboard. "What is the law of supply?"

Tyler wasted no time in answering this question. "The law of supply states that the price of a good and the quantity supplied are directly related. If the price increases, then the quantity supplied also increases, ceteris paribus." Tyler nodded to his frog-cat companion.

The instructor smiled as Tyler answered this question, also taking apparent pride in the quality of Tyler's answers. "What is the market equilibrium, and what role does the price of a good play in reaching and maintaining equilibrium?"

Tyler paused, more to savor the moment than to consider his answer. The intellectual spotlight was his and he was going to enjoy it. He winked at the feline-frog, adjusted his glasses, then answered, "The market is in equilibrium at the price at which the quantity demanded is equal to the quantity supplied. At this price the quantity that buyers are willing and able to buy is exactly the same as the quantity sellers are willing and able to sell. If the price is lower, then the quantity demanded is greater than the quantity supplied and there is a shortage of the good. And since buyers can't get all of the good that they want, they tend to bid up the price until the shortage is eliminated at the equilibrium price. If the price is higher than the equilibrium price the quantity supplied is greater than the quantity demanded, and a surplus of the good exists. In this case, since suppliers can't sell all of the good that they have, they reduce the price until the surplus is eliminated, also at the equilibrium price."

Tyler was quite satisfied with his answer. He thought how much like the professor he sounded with this answer. The little instructor creation also seemed pleased. The monkey-rabbit nodded and smiled though his as Tyler answered the question.

"Very, very good, Mr. Martin. Supremely excellent answer. One of the best we have ever had. You seem to have an superb understanding of the market." The instructor extended his... uh paw... which Tyler shook. "You should have no problem throughout the remainder of your lesson here in Leornia. I wish you the best of luck."

The instructor made a few more marks on his clipboard. Tyler waited politely as he finished. Then Tyler waited a little longer.

"Uhm..." Tyler said, "Excuse me. Is that all?"

"Yes," The instructor answered, looking up from his clipboard. "You have done very well. Just continue along the path until you reach the next test."

"But... uhm... don't I get some sort of reward," Tyler asked awkwardly.

The instructor gave a little laugh. "A reward was only for the first test. Each test is different. Had you answered these questions incorrectly, you would have faced "task" to further test you knowledge. But you have shown an understanding of markets. We need do no more."

"Oh," Tyler said, clearly disappointed, as the instructor slipped into the trees. Tyler was counting on another reward. Perhaps a bag of jewels. Hoisted the bags of fruit onto his shoulders, however, he was relieved that his burden would not expand.

"Oh well," Tyler said to the cat-frog once the monkey teacher had disappeared into the trees, "Shall we continue?"

Renewing his trek down the narrow orange trail, Tyler congratulated himself on a job well done. The professor would certainly be pleased with his the answers. Surely this was the sort of 'extra credit' learning that the professor had in mind.Tyler then wondered when the professor would 'pop in', like he did after the first test. He walked slowly, awaiting the sound of the professor's voice. But it did not come. This being, without question, the greatest moment of his academic career, Tyler was very disappointed by the silence. When he started to relay this disappointment to his frog-cat companion, he realized that the creature was on one of his jaunts into the trees.

Tyler's preoccupation with the professor's vocal absence and the frog's physical absence likely explains why he stumbled over the monkey-rabbit beast that lunged onto the path. The beast gave a small cry and cowered near the side of the trail.

"What the..." Tyler said as he tumbled to the ground, bags and fruit flying asunder. He pulled himself to a sitting position and, after finding his glasses, noticed the timid creature trembling near the trees.

"What are you doing fella, you could hurt someone darting around like that," Tyler scolded.

Tyler's anger quickly subsided when he realized the creature's paralyzing fright. Then his anger turned to compassion when he recognized this was the creature named Aristotle. The one he had encountered in the fruit patch the night before.

"What's wrong little guy," Tyler said apologetically, "I didn't hurt you did I?"

Aristotle shook his head, floppy ears snappy from side to side, as he rose to his feet. He lightly brushed orange dust from his purple clothes. Tyler wondered momentarily why Aristotle was dressed in purple, while the instructor was dressed in green. The thought quickly left.

"I'm sorry," Aristotle said. "I didn't intend to make you stumble. I only want to talk."

"But, last night you said you weren't an instructor," Tyler's newfound confidence damped by confusion, "Well okay, if you want to ask me some questions, go ahead and fire away. I'm ready when you are."

"Questions?" Aristotle looked around nervously, "I'm not here to ask questions. I just need to talk to you."

"Talk?" Tyler asked, slightly confused, yet certain this was another test. "Sure, I guess. Yeah, why not? Let's talk. What do you want to talk about?"

"I need your help," Aristotle said. "Everyone in Leornia needs your help. When I saw you last night I realized you were the human who can help us."

"Me?" Tyler smiled somewhat embarrassed. "How can I help you, I'm just a student?"

"Yes! You can help us! You must help," Aristotle persisted. "I know you are the right one, the one we need. It is my task to know. I shouldn't even be here. I'm not supposed to talk to learners. I'm only supposed to find them. If the professor knew I was here he would... " Aristotle's voice trailed off at the unthinkable.

Tyler was taken aback at the mention of the professor.

"You mean," Tyler asked, "the professor doesn't want you to talk to me?"

"Not your professor," Aristotle responded, then said, "You must help us. I know you're the one -- the only one."

"But," Tyler protested, "I don't know how I can help you."

"You can solve our problem. I sense it. You can help us. I know you can," Aristotle persisted, his pointed ears twitching for emphasis.

Then Aristotle suddenly turned his head and faced up the path, as if alerted by a sound. Even though Tyler heard nothing, he too looked up the path.

"I have to go," Aristotle said, "Someone is coming. It could be him. I don't want nightmares. I have to go."

"But...," Tyler stammered. "I don't understand. How can I help you?"

Too late. Aristotle dashed into the trees.

Now Tyler heard the noise from the path. While confident of his newfound intellectual prowess, Tyler remained wary of this land, of student eating monsters. With this monkey-rabbit's plea for help, grew a bit more anxious.

Tyler grabbed his fruit bags and moved quietly off the path, as far into the thickness of the umbrella tree foliage as he could go. Perhaps he was about to meet the hideous monster that he had feared. As he waited, as the sound grew louder, visions of his bloodied body returned.

The sound became distinct. It was the sound of walking. A tired sort of walking, complete with heavy breathing. From time to time the breathing was replaced by a high-pitched, eery moan. Tyler slowly untied the bags from his sturdy, glowing stick. It would make a suitable weapon. It would have to. Tyler would not be eaten without a fight.

He readied himself behind the trunk of a large umbrella tree just off of the path. The stick was held high, ready to swing, much like the all-star baseball play Tyler never was.

Around the bend in the path came the hideous monster.

Tyler closed his eyes and swung mightily. The stick's length made it awkward. It's length also ensured solid contact with the trunk of an adjacent umbrella tree. While the stick stopped in mid-swing, Tyler did not, and found himself rolling into the path. He came to rest at the feet of the monster.

The monster's feet wore expensive running shoes. The monster's legs were muscular, built up by frequent exercise. The monster's ensemble consisted of a pair of dark blue running shorts and a coordinated pale blue top. The monster had brown, shoulder length hair, which partly covered her blue eyes and her confused face. Over her shoulder she carried a large purple pouch that sloshed when she walked.

She bent down to Tyler and asked, "Are you okay?"

A few feet away, a winged feline-frog sat on an illuminated stick plant and laughed.


Go to: Chapter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Copyright © 1997, 2002 by Orley M. Amos, Jr. All rights reserved. Not to be quoted without permission of the author.

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