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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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ALLOCATION EFFECT A change in the allocation of resources caused by placing taxes on economic activity. By creating disincentives to produce, consume, or exchange, taxes generally alter resource allocations. The allocation effect is typically used when governments seek to discourage the production, consumption, or exchange of particular goods or activities that are deemed undesirable (such as tobacco use or pollution). This is one of two effects of taxation. The other (primary) is the revenue effect, which is the generation of revenue used to finance government operations.
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BEIGE MUNDORTLE
[What's This?]
Today, you are likely to spend a great deal of time at a dollar discount store hoping to buy either a blue mechanical pencil or super soft, super cuddly, stuffed animals. Be on the lookout for crowded shopping malls.
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The Dow Jones family of stock market price indexes began with a simple average of 11 stock prices in 1884.
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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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MPI
Marginal Propensity to Invest
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