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Unformatted text preview: Absolute advantage One person has an absolute advantage over another if he or she takes fewer hours to perform a task than the other person. Accommodating policy A policy that allows the effects of a shock to occur. Accounting profit The difference between a firm's total revenue and its explicit costs. Adverse selection The pattern in which insurance tends to be purchased disproportionately by those who are most costly for companies to insure. Aggregate demand (AD) Total planned spending on final goods and services. Aggregate demand (AD) curve Shows the relationship between aggregate demand and inflation; because short-run equilibrium output equals aggregate demand, the aggregate demand curve also shows the relationship between short-run equilibrium output and inflation; increases in inflation reduce aggregate demand and short-run equilibrium output, so the aggregate demand curve is downward-sloping. Aggregate supply shock Either an inflation shock or a shock to potential output; adverse aggregate supply shocks of both types reduce output and increase inflation. Aggregation The adding up of individual economic variables to obtain economy-wide totals. Allocative function of price Changes in prices direct resources away from overcrowded markets and toward markets that are underserved. Anchored inflationary expectations When people's expectations of future inflation do not change even if inflation rises temporarily. Appreciation An increase in the value of a currency relative to other currencies. Assets Anything of value that one owns. Asymmetric information Situations in which buyers and sellers are not equally well informed about the characteristics of goods and services for sale in the marketplace. Attainable point Any combination of goods that can be produced using currently available resources. Autarky A situation in which a country is economically self-sufficient; that is, it does not trade with other nations. Automatic stabilizers Provisions in the law that imply automatic increases in government spending or decreases in taxes when real output declines. Autonomous expenditure The portion of planned aggregate expenditure that is independent of output. Average benefit Total benefit of undertaking n units of an activity divided by n. Average cost Total cost of undertaking n units of an activity divided by n. Average labor productivity Output per employed worker....
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- Spring '07
- Absolute Advantage