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AGGREGATE MARKET: 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 aggregate market, 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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Lesson Contents
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Unit 1: Basic Flow |
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Unit 2: Financial Markets |
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Unit 3: Government |
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Unit 4: Foreign |
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Unit 5: Real World | |
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Circular Flow
This lesson introduces the circular flow model of the macroeconomy. The circular flow is a simple model based on the buying and selling relation between the household and business sectors which occurs through the product and factor markets. As a bonus, we complicate the simply circular flow model, by including the government and foreign sectors, and the financial markets. This lesson introduces several important macroeconomic concept, but more importantly, provides a useful model for interpreting macroeconomic activity. - In the first unit, we get an introduction to the simplest circular flow model that includes the household and business sectors and the product and factor markets.
- The second unit builds on the simple model by introducing the financial markets, which highlights the importance of household saving and business investment.
- The circular flow is expanding further in the third unit, with the introduction of the government sector, which highlights how taxes are diverted away from the household sector.
- The fourth unit adds one more sector to the circular flow model, the foreign sector, which illustrates the roles played exports and imports.
- The fifth unit wraps up this lesson by showing how several key measures of production and income revealed in the analysis of gross domestic production related to the circular flow.
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LOSS MINIMIZATION RULE A rule stating that a firm minimizes economic loss by producing output in the short run that equates marginal revenue and marginal cost if price is less than average total cost but greater than average variable cost. This is one of three short-run production alternatives facing a firm. The other two are profit maximization (if price exceeds average total cost) and shutdown (if price is less than average variable cost).
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time at a flea market looking to buy either a package of 4 by 6 index cards, the ones with lines or a 50 foot extension cord. Be on the lookout for the last item on a shelf.
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This isn't me! What am I?
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The average bank teller loses about $250 every year.
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"When you play, play hard; when you work, don't play at all. " -- Theodore Roosevelt, 26th US president
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PDI
Personal Disposable Income
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