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LIVING STANDARD: In principle, an economy's ability to produce the goods and services that consumers use to satisfy their wants and needs. In practice, it is the average real gross domestic product per person--usually given the name per capita real GDP.

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Lesson 9: Macro Basics | Unit 3: Business Cycles Page: 9 of 16

Topic: Causes <=PAGE BACK | PAGE NEXT=>

To understand business cycles, we need the causes:
  1. Consumption: If households decide to buy more or less, the rest of the economy follows suit.
  2. Capital Investment: Big swings can set in motion upward or downward spirals of total production.
  3. Government Purchases and Taxes: Government purchases can be contractionary or expansionary effect over the economy. Taxes affect the ability of the household and business sectors to buy production.
  4. Net Exports: Changes in exports can trigger expansions and contractions of the domestic economy.
  5. Circulating Money: Too much money can trigger and inflationary expansion, too little money can trigger contraction and unemployment.
  6. Resource Supply Considerations: Resource supply changes (energy prices, technology, wages, etc.) can trigger expansions and contractions.

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INDUCED INVESTMENT

Business investment expenditures that depend on income or production (especially national income and gross domestic product). That is, changes in income induce changes in investment. Induced investment reflects the observation that the business sector is inclined to reinvest profits (boosted by a growing economy) in capital goods. It is measured by the marginal propensity to invest (MPI) and is reflected by the positive slope of investment line. The alternative to induced investment is autonomous investment, which does not depend on income.

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Today, you are likely to spend a great deal of time at a crowded estate auction looking to buy either a T-shirt commemorating last Friday (you know why) or a rotisserie oven that can also toast bread. Be on the lookout for vindictive digital clocks with revenge on their minds.
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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.
"Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success. "

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