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ACTION LAG: In the context of economic policies, a part of the implementation lag involving the time it takes for appropriate policies to be launched once they have been agreed to by policy makers. Another part of the implementation lag is the decision lag. For fiscal policy, this involves appropriating funds to government agencies (for government spending) or changing the tax code (for taxes) For monetary policy, this involves the buying and selling government securities in the open market. The action lag is usually shorter for monetary policy than fiscal policy.

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Lesson 2: Economic Science | Unit 3: Verification Page: 10 of 20

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

Ceteris Paribus Assumption:
In order to test an hypothesis we need to keep constant other factors that may affect it. Other things are called ceteris paribus factors.

The last step in the process is to evaluate the hypothesis. We have two possibilities-data and hypothesis agree-- data and hypothesis don't agree.

The data and hypothesis agree.

  • Because we can not prove an absolute, this possibility gives us support for the hypothesis, but not absolute proof that it is correct.
  • To get a proof, we need to test the hypothesis many times under several different conditions. But even then, we can not be 100%, absolutely certain.
  • With growing certainty of the validity of the hypothesis, it becomes a principle and is added to the theory for an expanded theory.

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UTILITY MAXIMIZATION

The process or goal of obtaining the highest level of utility from the consumption of goods or services. The goal of maximizing utility is a key assumption underlying consumer behavior studied in consumer demand theory. Consumers are assumed to make choices, especially concerning the purchase of goods, such that they obtain the highest possible level of satisfaction. Utility maximization can be achieved at the peak of the total utility curve.

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APLS

GREEN LOGIGUIN
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Today, you are likely to spend a great deal of time at a dollar discount 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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Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
"The greatest things ever done on Earth have been done little by little. "

-- William Jennings Bryan

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International Bank for Settlements
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