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NATURAL UNEMPLOYMENT RATE: The rate of unemployment that occurs when the economy is at full employment. This rate is primarily composed of frictional and structural unemployment.
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Lesson 16: Aggregate Shocks | Unit 3: Basic Shifts
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Page: 9 of 21
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Topic:
AD Decrease: Long Run
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The long-run equilibrium is given by the intersection of the negatively-sloped AD curve and the vertical LRAS.- A decrease in AD results in a new long-run equilibrium.
- At the new equilibrium, real production does not change, it stays at Qf. The price level decreases from Po to P2.
- We're still missing a lot of short-run action that occurs as we go from one long-run equilibrium to another.
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DISEQUILIBRIUM, AGGREGATE MARKET The state of the aggregate market in which real aggregate expenditures are NOT equal to real production, which results in an imbalance that induces a change in the price level, aggregate expenditures, and/or real production. In other words, the opposing forces of aggregate demand (the buyers) and aggregate supply (the sellers) are out of balance. At the existing price level, either the four macroeconomic sectors (household, business, government, and foreign) are unable to purchase all of the real production that they seek or producers are unable to sell all of the real production that they have.
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YELLOW CHIPPEROON
[What's This?]
Today, you are likely to spend a great deal of time at a going out of business sale wanting to buy either a genuine down-filled pillow or one of those "hang in there" kitty cat posters. Be on the lookout for rusty deck screws.
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Paper money used by the Commonwealth of Massachusetts prior to the U.S. Revolutionary War, which was issued against the dictates of Britain, was designed by patriot and silversmith, Paul Revere.
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"The past is a foreign country; they do things differently there." -- Leslie Poles Hartley, Writer
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OMO
Open Market Operations
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