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PAYMENT FLOW: In the circular flow, the clockwise transfer of money in payment for the counter-clockwise physical flow of goods and services. The payment flow is the monetary payment for goods and services received by the household sector from the business sector through product markets and the monetary payment for resource services obtained by the business sector from the household sector through factor markets.
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Lesson 15: Aggregate Market | Unit 2: Equilibrium
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Page: 8 of 22
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The macroeconomy contains three interrelated aggregate markets--product markets, resource markets, and financial markets. In general, a market is in equilibrium when buyers and sellers come upon a price that generates the same quantity demanded and quantity supplied. Two macroeconomic notions of equilibrium: - Long-run equilibrium: All three aggregate markets achieve equilibrium simultaneously.
- Short-run equilibrium: Price and wage rigidity prevent equilibrium in the resource markets, even though the aggregate product and financial markets are in equilibrium.
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CONTRACTION A phase of the business cycle characterized by a general period of declining economic activity. A contraction is one of two basic business cycle phases. The other is expansion. The transition from contraction to expansion is termed a trough and the transition from expansion to contraction is termed a peak. The popular term for contraction, one that frequently shows up in the media, is recession.
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Mark Twain said "I wonder how much it would take to buy soap buble if there was only one in the world."
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"Plans are only good intentions unless they immediately degenerate into hard work." -- Peter Drucker, management consultant
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AD Aggregate Demand
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