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ACCELERATOR: The ratio between investment expenditures and the change in gross domestic product. This is based on the notion that business investment depends on the rate of growth of aggregate output. If the economy is expanding, in other words, then the business sector invests in more capital goods to produce the extra output needed. This accelerator effect modifies and magnifies the simply multiplier effect based on the induced consumption and the marginal propensity to consume.
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Lesson 20: Oligopoly | Unit 4: Analysis
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Page: 15 of 24
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Topic:
Kinked-Demand Curve
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- How and why oligopoly firms have rigid prices can be illustrated with the use of the kinked-demand curve.
- A kinked-demand curve is a demand curve with two distinct segments with different elasticities that join to form a kink.
- The two segments of a kinked-demand curve are:
- A relatively more elastic segment for price increases.
- A relatively less elastic segment for price decreases.
- The most striking feature of this curve is that it comes it three parts:
- One part corresponds with the relatively more elastic demand curve for price increases.
- The second part corresponds with the relatively less elastic demand curve for price decreases.
- The third part is the vertical line connecting these two segments.
- This disjointed marginal revenue curve is the key to oligopoly price rigidity.
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FEDERAL RESERVE NOTES Paper currency issued and authorized by the Federal Reserve System and used along with Treasury coins and checkable deposits as the M1 money supply for the U.S. economy. Federal Reserve notes were first issued in 1913 and currently circulate in denominations of $1, $2, $5, $10, $20, $50, and $100. These notes underwent a major redesign to prevent counterfeiting in the 1990s.
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The New York Stock Exchange was established by a group of investors in New York City in 1817 under a buttonwood tree at the end of a little road named Wall Street.
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