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SAVING-INVESTMENT EQUALITY: A classical economic proposition stating that flexible prices ensure an equality between saving and investment. This equality is essential to obtain the classical economic conclusion that unrestricted markets achieve and maintain full employment. This is one of the three assumptions underlying classical economics. The other two assumptions are flexible prices and Say's law.
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Lesson Contents
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Unit 1: Instability |
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Unit 2: Extension |
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Unit 3: Basic Shifts |
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Unit 4: Complex Shifts |
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Unit 5: Synthesis | |
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Aggregate Shocks
In this lesson we use the aggregate market model to analyze assorted disruptions that cause shifts of the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves. The reason for doing this, of course, is to explain and understand macroeconomic activity, especially business cycle instability that causes inflation and unemployment. - The first unit of this lesson reviews the aggregate market and examines how it is affected macroeconomic instability.
- In the second unit, we take and look at assorted demands on both the demand side and supply side of the aggregate market that cause shorts to the aggregate market.
- We then move into an analysis of six basic shifts involving increases and decreases in the aggregate demand, short-run aggregate supply, and long-run aggregate supply curves.
- The fourth unit builds on these six basic shifts to examine four complex shifts in which recessionary and inflationary gaps trigger self-correction adjustments of the short-run aggregate supply.
- We close out this lesson in the fifth with a thought or two on how the aggregate market can be used to explain business cycle fluctuations.
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INDUCED SAVING Household saving that depends on income or production (especially disposable income, national income, or even gross domestic product). That is, changes in income induce changes in saving. Induced saving reflects the fundamental psychological law put forth by John Maynard Keynes. It is measured by the marginal propensity to save (MPS) and is reflected by the positive slope of saving line. The alternative to induced saving is autonomous saving, which does not depend on income.
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BLUE PLACIDOLA
[What's This?]
Today, you are likely to spend a great deal of time at a flea market hoping to buy either a birthday greeting card for your grandmother or a coffee cup commemorating yesterday. Be on the lookout for vindictive digital clocks with revenge on their minds.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
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"Experience keeps a dear school, but fools will learn in no other. " -- Benjamin Franklin
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Securities and Investment Board
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