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January 17, 2019 

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REAL: The value after adjusting for inflation. Pointy-headed economist are frequently interested in comparing stuff (production, income, or whatever) in one year with similar stuff in another year. However, in that inflation can distort such a comparison, it's best made using a fixed set of prices that eliminate inflationary changes. In practice, this is accomplished by using the prices in an arbitrary "base year." Once the price differences have been eliminated, the numbers are said to be measured in real dollars.

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Lesson 12: Business Cycles | Unit 1: Instability Page: 2 of 26

Topic: Business Cycles <=PAGE BACK | PAGE NEXT=>

Business cycles are irregular, nonperiodic fluctuations in aggregate economic activity. Life is good, then it's bad. It's a roller coaster ride.

For example, the Great Depression was the worst economic period in this century.

  • Unemployment reached 25%.
  • Total production declined by about 40%.
  • Investment declined by 90%.
During the 1920s, production was up, unemployment was down, life was good, then it got bad.
  • Although we use the term 'cycle', we don't know how long an expansion or a contraction will last. The economy might expand for a year or it might expand for a decade before it declines.

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ABILITY-TO-PAY PRINCIPLE

A taxation principle stating that taxes should be based on the ability to pay taxes. The ability-to-pay principle works from the proposition that those who have the greatest income should pay the most taxes. The ability-to-pay principle is the only reasonable way to finance the provision of public goods such as national defense, public health, and environmental quality. This is one of two taxation principles. The other is the benefit principle, which states taxes should be based on the benefits received.

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Today, you are likely to spend a great deal of time wandering around the shopping mall seeking to buy either a looseleaf notebook binder or hand lotion, a big bottle of hand lotion. Be on the lookout for deranged pelicans.
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Mark Twain said "I wonder how much it would take to buy soap buble if there was only one in the world."
"Being defeated is only a temporary condition; giving up is what makes it permanent."

-- Marilyn vos Savant, Author

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