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TIME DEPOSITS: Interest-paying bank accounts maintained by traditional commercial banks, credit unions, savings and loan associations, and mutual savings banks with a minimum time (at least seven days) before deposited funds can be withdrawn. Time deposits come in one of two varieties: (1) savings deposits and (2) certificates of deposit. The minimum time period prevents these accounts from functioning as demand deposits and being widely used as money. Time deposits, along with money market mutual funds, are added to M1 to derive M2.
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Lesson 12: Business Cycles | Unit 5: Policies
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Page: 25 of 26
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Contractionary policies avoid or limit the problems of business cycle expansions.- Contractionary fiscal policy is decreasing government spending or increasing taxes. Less spending can directly offset an inflation-inducing expansion. Higher taxes reduces spending indirectly by reducing household income.
- Contractionary monetary policy is decreasing in the amount of money in circulation. Less money means less spending.
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INFLATION PROBLEMS Two notable problems are associated with inflation--uncertainty and haphazard redistribution. Inflation, especially inflation that varies from month to month and year to year, makes long-term planning quite difficult. Prices, wages, taxes, interest rates, and other nominal values that enter into consumer, business, and government planning decisions can be significantly affected by inflation. Moreover, inflation tends to redistribute income and wealth in a haphazard manner--some people win and some people lose. This redistribution might not be that desired by society, failing to promote any of the basic economic goals of efficiency, equity, stability, growth, or full-employment.
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PURPLE SMARPHIN
[What's This?]
Today, you are likely to spend a great deal of time going from convenience store to convenience store seeking to buy either a birthday gift for your grandmother or a T-shirt commemorating yesterday. Be on the lookout for the last item on a shelf.
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The average bank teller loses about $250 every year.
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"All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence. " -- Martin Luther King Jr., civil rights leader
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OECD
Organization for Economic Co-operation and Development
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