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ADJUSTMENT, SHORT-RUN AGGREGATE MARKET: Disequilibrium in the short-run aggregate market induces changes in the price level that restore equilibrium. If the price level is above the short-run equilibrium price level, economy-wide product market surpluses cause the price level to fall. If the price level is below the short-run equilibrium price level, economy-wide product market shortages cause the price level to rise. In both cases short-run equilibrium is restored. You might want to compare adjustment, long-run aggregate market. Price level changes induce changes in both aggregate expenditures and real production. Unlike the long-run aggregate market, changes in the price level can induce changes in short-run aggregate supply, making it greater or less than full-employment real production.
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GAINS FROM TRADE The combination of consumer surplus and producer surplus obtained by buyers and sellers when engaging in a market exchange. Gains from trade arise because buyers are typically willing and able to pay a higher price to purchase a good than what they end up paying and because sellers are typically willing and able to accept a lower price to sell a good than what they end up receiving. Both sides of the market exchange are thus better off, have a net gain in welfare, by making the trade. While all types of market exchanges generate gains from trade, this topic is perhaps most important for an understanding of international trade.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time driving to a factory outlet seeking to buy either a coffee cup commemorating next Thursday or a replacement remote control for your stereo system. Be on the lookout for high interest rates.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
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"I can't change the direction of the wind, but I can adjust my sails to always reach my destination." -- Jimmy Dean
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