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SELF-CORRECTION, INFLATIONARY GAP: The automatic process through which the aggregate market achieves long-run equilibrium by eliminating an inflationary gap created by short-run equilibrium. With an inflationary gap short-run equilibrium real production is greater than full-employment real production, meaning resource markets have shortages, and in particular labor is overemployed. Self-correction is the process in which these temporary imbalances are eliminated through flexible prices as the aggregate market achieves long-run equilibrium. The key to this process is shifts of the short-run aggregate supply curve caused by changes in wages and other resource prices. The long-run result is lower wages and a decrease in short-run aggregate supply.
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                           UNEMPLOYMENT, PRODUCTION POSSIBILITIES: Unemployment is the condition that exists when some available resources are NOT engaged in the production of goods and services. In other words, some resources that could be used for production are not being used. This is indicated in production possibilities analysis by producing a combination of goods that places the economy inside the production possibilities curve. Production possibilities, which analyzes the alternative combinations of two goods that an economy can produce with given resources and technology, indicates unemployment when production is inside the production possibilities curve. Unemployment means resources that could be used for production are not being used. And when some resources are not being used for production, the economy does not reach the production possibilities curve--the curve that corresponds to full employment. In particular, unemployment results from any point INSIDE the production possibilities curve. To illustrate this, use the mouse arrow to point out unemployment as all points, including L, that lie INSIDE this curve for the production of crab puffs and storage sheds. However, you might also note that points D and J on the boundary of the production possibilities curve achieve full employment. In addition, note that point M is not attainable with existing resources and technology.
 Recommended Citation:UNEMPLOYMENT, PRODUCTION POSSIBILITIES, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: June 8, 2023]. Check Out These Related Terms... | | | | | | | | | Or For A Little Background... | | | | | | | | And For Further Study... | | | | | | | | | | | | | | Related Websites (Will Open in New Window)... | | | | | | | | | | | | | | |
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On a typical day, the United States Mint produces over $1 million worth of dimes.
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"Never confuse a single defeat with a final defeat." -- F. Scott Fitzgerald, writer
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