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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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AGGREGATE SUPPLY INCREASE, SHORT-RUN AGGREGATE MARKET A shock to the short-run aggregate market caused by an increase in aggregate supply, resulting in and illustrated by a rightward shift of the short-run aggregate supply curve. An increase in aggregate supply in the short-run aggregate market results in a decrease in the price level and an increase in real production. The level of real production resulting from the shock can be greater or less than full-employment real production.
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GRAY SKITTERY
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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 looking to buy either hand lotion, a big bottle of hand lotion or a lighted magnifying glass. Be on the lookout for celebrities who speak directly to you through your television.
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The portion of aggregate output U.S. citizens pay in taxes (30%) is less than the other six leading industrialized nations -- Britain, Canada, France, Germany, Italy, or Japan.
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"Leadership is the art of getting someone else to do something you want done because he wants to do it." -- Dwight Eisenhower, 34th US president
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Osaka Securities Exchange (Japan)
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