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ADJUSTMENT, LONG-RUN AGGREGATE MARKET: Disequilibrium in the long-run aggregate market induces changes in the price level that restore equilibrium. If the price level is above the long-run equilibrium price level, economy-wide product market surpluses cause the price level to fall. If the price level is below the long-run equilibrium price level, economy-wide product market shortages cause the price level to rise. In both cases long-run equilibrium is restored. Price level changes induce changes in aggregate expenditures but NOT changes in real production. The reason is that long-run aggregate supply is full-employment real production, which is unaffected by the price level.
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INVESTMENT, PRODUCTION POSSIBILITIES Investment typically refers to the purchase of productive capital by business in anticipation of increasing production and (presumably) generating more profit. More generally, investment can be considered as sacrificing the current satisfaction of wants and needs (consumption goods) to expand productive capability (capital goods). Production possibilities analysis can be used to illustrate the tradeoff between consumption and capital as a movement along a production possibilities curve.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time visiting every yard sale in a 30-mile radius trying to buy either a replacement battery for your pocket calculator or a how-to book on home remodeling. Be on the lookout for crowded shopping malls.
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This isn't me! What am I?
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The 22.6% decline in stock prices on October 19, 1987 was larger than the infamous 12.8% decline on October 29, 1929.
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"Lord, where we are wrong, make us willing to change; where we are right, make us easy to live with. " -- Peter Marshall, US Senate chaplain
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ATO
At The Opening
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