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September 21, 2021 

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IMPLICIT COST: An opportunity cost that does NOT involve a money payment or a market transaction. This should be contrasted with explicit cost that DOES involve a money payment or a market transaction. The common misconception among non-economists out there in the real world is that the term "cost" is synonymous with the term "payment," that is, all costs are explicit costs, to be a cost you have to give up some money. Well, I'm here to tell you that this isn't true. Cost is opportunity cost. It's the satisfaction NOT received from activities NOT pursued. It's the value of foregone production. And not all opportunity costs involve a money payment.

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Lesson 12: Business Cycles | Unit 4: Causes Page: 20 of 26

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

Re-election seeking politicians is a second explanation for business cycles. Four propositions lay the foundation:
  • An elected leader remains an elected leader only if re-elected.
  • Government can influence economic activity through stabilization policies. Fiscal policy, lower taxes and more spending, can trigger an expansion. The opposite can cause a contraction.
  • Voters re-elect current leader during good times and elect new leaders during bad times. They vote their pocketbooks.
  • Elected leaders know how this process works and give us the recipe for a politically induced business cycles.

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MARGINAL PROPENSITY FOR GOVERNMENT PURCHASES

The change in government purchases induced by a change in income or production (national income or gross domestic product). The marginal propensity for government purchases (abbreviated MPG) is another term for the slope of the government purchases line and is calculated as the change in government purchases divided by the change in income or production. The MPG plays a role in Keynesian economics. It augments the slope of the aggregate expenditures line and is part of the multiplier process. A related marginal measure is the marginal propensity to consume.

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PINK FADFLY
[What's This?]

Today, you are likely to spend a great deal of time browsing about a thrift store hoping to buy either clothing for your kitty cats or a set of luggage without wheels. Be on the lookout for small children selling products door-to-door.
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The New York Stock Exchange was established by a group of investors in New York City in 1817 under a buttonwood tree at the end of a little road named Wall Street.
"Man is born to live, not to prepare for life. "

-- Boris Pasternak, writer

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Journal of Human Resources
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