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ALLOCATION EFFECT: The goal of imposing taxes to change the allocation of resources, that is, to discourage the production, consumption, or exchange or one type of good usually in favor of another. This is one of two reasons that governments impose taxes. The other reason is the revenue effect. Because people would rather not pay taxes, taxes create disincentives to produce, consume, and exchange. If society deems that less of a particular good, such as alcohol, pollution, or cigarettes are "bad," then a tax can reduce its production and consumption, and thus change the allocation of resources.
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Lesson 16: Aggregate Shocks | Unit 3: Basic Shifts
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Page: 7 of 21
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There are two directions that the aggregate demand curve can shift:- An increase in aggregate demand is a rightward shift of the AD curve.
- A decrease in aggregate demand is a leftward shift of the AD curve.
And we have the AD curve shifting in two versions of the aggregate market, long run and short run. This gives us four basic curve-shifting alternatives: - An increase, with the long-run aggregate market.
- A decrease, with the long-run aggregate market.
- An increase, with the short-run aggregate market.
- A decrease, with the short-run aggregate market.
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ASSUMPTIONS, PRODUCTION POSSIBILITIES The four key assumptions underlying production possibilities analysis are: (1) resources are used to produce one or both of only two goods, (2) the quantities of the resources do not change, (3) technology and production techniques do not change, and (4) resources are used in a technically efficient way.
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RED AGGRESSERINE
[What's This?]
Today, you are likely to spend a great deal of time flipping through mail order catalogs wanting to buy either a how-to book on wine tasting or a bookshelf that will fit in your closet. Be on the lookout for slow moving vehicles with darkened windows.
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Lombard Street is London's equivalent of New York's Wall Street.
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"Experience keeps a dear school, but fools will learn in no other. " -- Benjamin Franklin
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NEDC
National Economic Development Council
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