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PARADOX OF THRIFT: The notion that an increase in saving, which is prudent for an individual during bad economic times, is not the best course of action for the macroeconomy. If total saving in the economy increases, then consumption and aggregate expenditures decline, which causes a decline in aggregate output.

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Lesson 4: Production Possibilities | Unit 2: The Schedule Page: 8 of 24

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  • How a production possibilities schedule is set up to display bundles of two different goods.
  • How to work with and interpret a simple production possibilities schedule.
  • How and why the production tradeoff between two goods reflects opportunity cost.
  • The law of increasing opportunity cost and how it is indicated by increasing negative opportunity cost numbers in the production possibilities schedule.


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AGGREGATE EXPENDITURES DETERMINANTS

Ceteris paribus factors, other than aggregate income or production, that are held constant when the aggregate expenditures line is constructed and which cause the aggregate expenditures line to shift when they change. Some of the more important aggregate expenditures determinants are interest rates, expectations, fiscal policy, wealth, and exchange rates.

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Today, you are likely to spend a great deal of time at the confiscated property police auction trying to buy either a remote controlled sports car with an air spoiler or semi-gloss photo paper that works with your neighbor's printer. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
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Three-forths of the gold mined each year is used to manufacture jewelry.
"Plans are only good intentions unless they immediately degenerate into hard work."

-- Peter Drucker, management consultant

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