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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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TAX EFFECTS The primary reason that governments collect taxes from members of society is to finance government operations and provide public goods. However, taxes also create disincentives to engage in the taxed activity, which causes a change in the allocation of resources. This two consequences of taxes are summarized in two essential tax effects -- the revenue effect and the allocation effect. While all taxes have both, the key to effective government is minimize the allocation effect if the goal is to generate revenue and to minimize the revenue effect if the goal is to change the allocation of resources.
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GREEN LOGIGUIN
[What's This?]
Today, you are likely to spend a great deal of time at a dollar discount store hoping to buy either a really, really exciting, action-filled video game or a coffee cup commemorating the moon landing. Be on the lookout for jovial bank tellers.
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This isn't me! What am I?
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Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
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"Defeat is simply a signal to press onward." -- Helen Keller, lecturer, author
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WAPM
Weak Axiom of Profit Maximization
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