econ360-05oct

econ360-05oct - 1. In economics, auction market is a method...

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1. In economics, auction market is a method for determining the value of a commodity that has an undetermined value or variable price. Supply and demand depend solely on (W/P) real wage, which is assumed to be known. It is also assumed that the market is always in equilibrium with the perfectly flexible money wage, adjusting for the equation of supply and demand. 2. The aggregate supply shows the fact that higher price levels will require accordingly higher levels of the money wage for labor market equilibrium. Output and employment are supply driven not by the level of aggregate supply, prices will not affect either. 3. The equation of exchange is the quantity theory of money and explains the price level to the quantity of money, or in other words the turnover rate of each dollar. Equation of exchange is MV = PQ. M is the quantity of money, V is the Velocity of money, P equals the price level, and Q the total number of items purchased. 4. Fisher’s argument was that the velocity of money was set by payment behavior and
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This note was uploaded on 05/16/2008 for the course ECON 360 taught by Professor Campbell during the Spring '08 term at SUNY Potsdam.

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econ360-05oct - 1. In economics, auction market is a method...

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