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AMORTIZATION: The process of paying off a debt liability and accrued interest through a series of equal, periodic payments. Car loans and mortgages are two debts commonly paid off through amortization. Your monthly car payment, for example, partially pays for interest accrued on the outstanding balance and partly reduces that balance. Because one payment reduces the outstanding balance, each subsequent payment has a smaller portion for interest. If the proper amortization schedule has been calculated, your loan will be paid off with the last payment.

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Lesson 12: Elasticity and Demand | Unit 5: Other Measures Page: 24 of 25

Topic: Cross Elasticity Of Demand <=PAGE BACK | PAGE NEXT=>

  • How responsive is my demand to this change in my other prices? To answer these questions, we need the cross elasticity of demand.

  • Cross elasticity of demand is the relative response of the demand for one good to changes in the price of another good.
  • Or stated in percentage terms: the cross elasticity of demand is the percentage change in demand for one good resulting from a percentage change in the price of another good.

  • The cross elasticity of demand is a handy numerical measure commonly used by economists to identify complement and substitute goods:

    • For a substitute good, cross elasticity is positive, meaning that an increase in the price of one good leads to an increase in demand for the other good.

    • For an complement good, cross elasticity is negative, meaning that an increase in the price of one good leads to a decrease in demand for the other good.

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INFLATIONARY GAP, KEYNESIAN MODEL

The difference between equilibrium aggregate production achieved in the Keynesian model and full-employment aggregate production that occurs when equilibrium aggregate production is greater than full-employment aggregate production. An inflationary gap, also termed an expansionary gap, is associated with a business-cycle expansion. The prescribed Keynesian remedy for an inflationary gap is contractionary fiscal policy. This is one of two alternative output gaps that can occur when equilibrium generates production that differs from full employment. The other is a recessionary gap.

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Today, you are likely to spend a great deal of time at a flea market hoping to buy either a birthday greeting card for your grandmother or a coffee cup commemorating yesterday. Be on the lookout for vindictive digital clocks with revenge on their minds.
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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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