Four Components of Aggregate Demand

There are four components of Aggregate Demand (AD); Consumption (C), Investment (I), Government Spending (G) and Net Exports (X-M). Aggregate Demand shows the relationship between Real GNP and the Price Level.Four Components of Aggregate Demand Any increase in any of the four components of aggregate demand leads to an increase or shift…
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Financial Intermediaries

Afinancial intermediary is a financial institution that connects surplus and deficit agents. The classic example of a financial intermediary is a bank that consolidates deposits and uses the funds to transform them into loans. The job of financial intermediaries is to connect borrowers to savers. For example, A bank loan is a form of indirect…
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The Glass-Steagall Act

The Glass-Steagall Act (1933) separated depository institutions from investment banks and limited securities, activities, and affiliations within commercial banks and securities firms.In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their…
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Division of Output between Factories

The division of output between two factories is a case in which you have two factories; an older plant with a higher Marginal Cost and a newer factory with a lower Marginal Cost.To determine how much each factory should produce, you have to draw a horizontal Price/Demand line across the two graphs (of the old and new factory). Where this price…
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Peak Oil: Will We Ever Run Out?

As oil becomes scarcer, and as the Laws of Demand tell us, the price of oil will continue to rise. To combat this, on the demand side, we can try to find substitutes to use instead of oil. While on the supply side, we can either try to find more reserve or come up with more substitutes. We would only run out of it if there were no demand left for…
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