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SECOND ESTATE: In past centuries, this included kings, queens, dukes and others of the ruling elite. In modern times, this includes business leaders who have extensive ownership of and control over resources, especially capital, entrepreneurship, and land.
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Lesson 12: Business Cycles | Unit 1: Instability
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Page: 4 of 26
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Topic:
Contractionary Bad Times
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Contractionary bad times give us the most problems.- First: Real GDP declines during a contraction. This means less production for the four sectors to buy.
- Second: Unemployment increases. Resources, especially labor, produce less and receive less income. 3-5 million workers newly employed.
- Third: The incomes of employed resources also tend to fall, or at least not rise as much as an expansion.
- Fourth: Business profits decline and bankruptcies increase.
- Fifth: Social problems, including crime, poverty, and alcoholism, worsen.
But contractions have some good:- Inflation remains low or declines.
- Some resources are more efficiently allocated.
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LAW OF COMPARATIVE ADVANTAGE A principle that states that every nation, worker, or production entity has a production activity that incurs a lower opportunity cost than that of another nation, worker, or production entity, which means that trade between the two can be beneficial to both if each specializes in the production of a good with lower relative opportunity cost. This law is most often studied in the confines of international trade, but it also applies to labor and other types of production.
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A communal society, a prime component of Karl Marx's communist philosophy, was advocated by the Greek philosophy Plato.
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"If anything terrifies me, I must try to conquer it. " -- Francis Charles Chichester, yachtsman, aviator
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AIC
Akaike's Information Criterion
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