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# Permanent Versus Temporary Price Effects

## Definition

The distinction between price changes that result from fundamental economic conditions (permanent) and those caused by temporary factors such as speculation, seasonal variations, or market manipulation (temporary). Understanding this distinction is crucial for effective economic policy.

## Source Chapter

Book IV, Chapter 6

## Context

Smith uses this distinction to analyze various price phenomena, including the effects of bounties, monopolies, and currency degradation. He argues that effective economic policy must distinguish between permanent structural changes and temporary market fluctuations.

## Economic Domain

General Theory

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