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ALLOCATION EFFECT: The goal of imposing taxes to change the allocation of resources, that is, to discourage the production, consumption, or exchange or one type of good usually in favor of another. This is one of two reasons that governments impose taxes. The other reason is the revenue effect. Because people would rather not pay taxes, taxes create disincentives to produce, consume, and exchange. If society deems that less of a particular good, such as alcohol, pollution, or cigarettes are "bad," then a tax can reduce its production and consumption, and thus change the allocation of resources.
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Lesson 12: Business Cycles | Unit 1: Instability
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Page: 4 of 26
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Topic:
Contractionary Bad Times
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Contractionary bad times give us the most problems.- First: Real GDP declines during a contraction. This means less production for the four sectors to buy.
- Second: Unemployment increases. Resources, especially labor, produce less and receive less income. 3-5 million workers newly employed.
- Third: The incomes of employed resources also tend to fall, or at least not rise as much as an expansion.
- Fourth: Business profits decline and bankruptcies increase.
- Fifth: Social problems, including crime, poverty, and alcoholism, worsen.
But contractions have some good:- Inflation remains low or declines.
- Some resources are more efficiently allocated.
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AGGREGATE SUPPLY INCREASE, LONG-RUN AGGREGATE MARKET A shock to the long-run aggregate market caused by an increase in aggregate supply, resulting in and illustrated by a rightward shift of the long-run aggregate supply curve. An increase in aggregate supply in the long-run aggregate market results in a decrease in the price level and an increase in real production. The level of real production resulting from the shock is a greater level of full-employment real production.
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WHITE GULLIBON [What's This?]
Today, you are likely to spend a great deal of time searching the newspaper want ads trying to buy either a remote controlled train set or a genuine down-filled snow parka. Be on the lookout for gnomes hiding in cypress trees. Your Complete Scope
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The first U.S. fire insurance company was established by Benjamin Franklin in 1752 in Philadelphia.
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"The mediocre teacher tells. The good teacher explains. The superior teacher demonstrates. The great teacher inspires." -- William Ward ‚ Texas Wesleyan University Administrator
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GMM Generalized Method of Moments
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