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October 24, 2021 

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ALLOCATIVE EFFICIENCY: Obtaining the most consumer satisfaction from available resources. Allocative efficiency means that our economy is doing the best job possible of satisfying unlimited wants and needs with limited resources -- that is, of addressing the problem of scarcity.

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PURCHASING POWER: In general the quantities of goods and services that can be bought with a given amount of money. The notable feature of purchasing power is that it declines as prices rise. In particular, inflation is the number one nemesis of purchasing power. When inflation gives higher prices, purchasing power falls. Be careful, though, that you don't get too caught up in the purchasing power of just a single dollar. The real question is not how much stuff one dollar can buy, but how many dollars you have. In other words, while the price of a brand new car might have been $10 when you were a kid (in the good old days), the average annual income was also $20. That's the same purchasing power as a $10,000 car price and a $20,000 income.

     See also | real | nominal | money | price level | inflation | cost of living | living standard | store of value |


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AGGREGATE DEMAND CURVE

A graphical representation of the relation between aggregate expenditures on real production and the price level, holding all ceteris paribus aggregate demand determinants constant. The aggregate demand (AD) curve is one side of the graphical presentation of the aggregate market. The other side is occupied by the long-run aggregate supply curve and/or the short-run aggregate supply curve. The negative slope of the aggregate demand curve captures the inverse relation between aggregate expenditures on real production and the price level. This negative slope is attributable to the interest-rate, real-balance, and net-export effects.

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Today, you are likely to spend a great deal of time looking for the new strip mall out on the highway hoping to buy either a coffee cup commemorating last Friday (you know why) or a wall poster commemorating the first day of spring. Be on the lookout for slow moving vehicles with darkened windows.
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Parker Brothers, the folks who produce the Monopoly board game, prints more Monopoly money each year than real currency printed by the U.S. government.
"Do not let what you cannot do interfere with what you can do. "

-- John Wooden, basketball coach

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