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HYSTERESIS: The notion that the natural rate of unemployment is affected by historical events, especially the onset of a business-cycle contraction. Hysteresis results because unemployed resources are permanently changed, through loss of job skills or seniority, making them less employable when the contraction is over. The labor market itself might be permanently change. The result is a permanent increase in structural and frictional unemployment and a higher natural unemployment rate. Alternatively, a prolonged business-cycle expansion can generate long-term changes that cause a permanent decrease in the natural unemployment rate.

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Lesson 19: Money Creation | Unit 4: The Multiplier Page: 16 of 23

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A multiplier captures the magnified relationship between an activity and the triggering event.The money creation process:
  • The activity is the deposit creation.
  • The trigger event is extra bank reserves.
The multiplier:
  • In our example, the banking system creates $1,000 of deposits from $100 worth of reserves.
  • The deposit multiplier equals 10: Each $1 of extra reserves triggers 10 times the amount in deposits.
D = mR

D = Number of deposits created.
R = Number of reserves added to the banking system.
m = The value of the multiplier (10 in the example).


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RENT SEEKING

The inclination of everyone who is alive and breathing to get as much extra income, wealth, profit, or satisfaction as they can. Rent, while technically considered the factor payment for the use of land resources, is also commonly used as a synonym for economic profit, for the acquisition of benefits above opportunity cost. Rent seeking is the entirely rational process of obtain as much "extra" as possible. In effect, rent seeking is nothing more than utility maximization. Efficiency problems can arise, however, when rent seeking is enhanced and enabled through market control, political influence, or actions of special interest groups.

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BEIGE MUNDORTLE
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Today, you are likely to spend a great deal of time going from convenience store to convenience store hoping to buy either a replacement battery for your pocket calculator or a how-to book on home remodeling. Be on the lookout for strangers with large satchels of used undergarments.
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The average bank teller loses about $250 every year.
"When I stand before God at the end of my life, I would hope that I would not have a single bit of talent left, and could say, I used everything you gave me."

-- Erma Bombeck, writer

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