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RENTAL INCOME OF PERSONS: The official item in the National Income and Product Accounts maintained by the Bureau of Economic Analysis measuring rent earned by the household sector for supplying land and related services. This is one of five official factor payments making up national income. The other four are compensation of employees, net interest, corporate profits, and proprietors' income. Rental income of persons is typically the smallest of the five factor payment categories, usually less than 5% of national income.

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Lesson 17: Money | Unit 2: More About Money Page: 8 of 25

Topic: Standard of Deferred Payment <=PAGE BACK | PAGE NEXT=>

Money is used as a standard of deferred payment, buying now and paying later.
  • A car loan: Borrow money to buy a car today, then pay off the loan with deferred payments into the future.
  • Money as a standard of deferred payment is a direct consequence of the unit of account and store of value functions of money.
  • Money is the standard for current prices and future payments based on those prices.
  • For money to function as a deferred payment, it must retain value.
  • The key to storing value in money is price inflation.
  • Deferred payments need to anticipate future money values based on future inflation.
  • The inflation adjustment is accomplished by through interest rates.

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SAY'S LAW

A principle of classical economics developed the French economist Jean-Baptiste Say that is commonly summarized as "supply creates its own demand." This law, also referred to as Say's "theory of markets" or "law of markets," indicates that the act of producing aggregate output generates a sufficient amount of aggregate income to purchase all of the output produced. This principle indicated that excess production or insufficient demand for production was unlikely to occur, at least for any extended period. When combined with flexible prices and saving-investment equality, Say's law further implied that an economy would achieve and maintain full employment of resources. This law was singled out by John Maynard Keynes in his critique of classical economics, but remains relevant in current macroeconomic analysis, reflected in the circular flow model.

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Today, you are likely to spend a great deal of time at a crowded estate auction wanting to buy either a flower arrangement with daisies and carnations for your uncle or a coffee cup commemorating next Thursday. Be on the lookout for high interest rates.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
"Now is the only time there is. Make your now wow, your minutes miracles, and your days pay. Your life will have been magnificently lived and invested, and when you die you will have made a difference."

-- Mark Victor Hansen

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