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RECESSIONARY 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 less than full-employment aggregate production. A recessionary gap, also termed a contractionary gap, is associated with a business-cycle contraction. The prescribed Keynesian remedy for a recessionary gap is expansionary 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 an inflationary gap.

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Lesson 14: Production | Unit 3: Product Curves Page: 14 of 25

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  • How total, average, and marginal product react to changes in the variable input is determined by the law of diminishing marginal returns:

    MP curve

    • Note the "hump-shape" of the curve, with increasing marginal product followed by decreasing then negative marginal product.
    • The negatively-sloped portion of the curve is due to the law of diminishing marginal returns.

    TP curve

    • Note that marginal product is the slope of the TP curve.

    AP curve

    • Marginal product and average product are related by the average-marginal rule, which applies to the averages and marginals for any given variable.

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GOLDSMITH MONEY CREATION

An illustration of the basic money creation process undertaken by banks using the hypothetical activities of a hypothetical goldsmith. The goldsmith profession of Medieval Europe provides insight into the modern banking business, including the seemingly magical ability of banks to create valuable money out of inputs with significantly less value.

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Today, you are likely to spend a great deal of time searching the newspaper want ads hoping to buy either income tax software or a how-to book on the art of negotiation. Be on the lookout for poorly written technical manuals.
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During the American Revolution, the price of corn rose 10,000 percent, the price of wheat 14,000 percent, the price of flour 15,000 percent, and the price of beef 33,000 percent.
"All things are difficult before they are easy."

-- Thomas Fuller, Physician

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A nth-order Autoregressive Process
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