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MACROECONOMIC PROBLEMS: Undesirable situations that exist in the macroeconomy, largely because one or more of the macroeconomic goals are not satisfactorily attained. The primary problems are unemployment, inflation, and stagnant growth. Macroeconomic theories are designed to explain why these problems emerge and to recommend corrective policies.
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Lesson 16: Aggregate Shocks | Unit 2: Extension
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Page: 5 of 21
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The aggregate market has a perpetual inclination to adjust from short-run equilibrium to long-run equilibrium.- The aggregate market self-correction mechanism relies on wages, the key production cost determinant.
- Short-run labor market imbalances induce wage changes that move the aggregate market to long-run equilibrium.
A recessionary gap Unemployment causes lower wages and production costs, and an increase in short-run aggregate supply. An inflationary gap Labor market imbalances increase wages and production cost, and decrease in short-run aggregate supply. Long run equilibrium is restored in both cases.
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INDUSTRY A group of firms producing goods or services that are close substitutes-in-consumption. The similarity of the products makes it possible to analyze the production in a market framework. An industry can be broadly defined, such as the manufacturing industry, or narrowly specified, such as the root beer industry. For most economic analysis the term industry is used interchangeably with the term market.
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PINK FADFLY
[What's This?]
Today, you are likely to spend a great deal of time waiting for visits from door-to-door solicitors wanting to buy either a wall poster commemorating next Thursday or a pair of gray heavy duty boot socks. Be on the lookout for florescent light bulbs that hum folk songs from the sixties.
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In the late 1800s and early 1900s, almost 2 million children were employed as factory workers.
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"We succeed in enterprises (that) demand the positive qualities we possess, but we excel in those (that) can also make use of our defects." -- Alexis de Tocqueville, Statesman
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VAT
Value Added Tax
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