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PHYSICAL ASSET: A productive resource, capital, property, or satisfaction-generating good. Also termed real asset. This should be contrasted with financial assets that are legal claims on physical assets.

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INTEREST-RATE EFFECT: A change in aggregate expenditures on real production, especially those made by the household and business sectors, that results because a change in the price level alters the interest rate which then affects the cost of borrowing. This is one of three effects underlying the negative slope of the aggregate demand curve associated with a movement along the aggregate demand curve and a change in aggregate expenditures. The other two are real-balance effect and net-export effect.

     See also | aggregate demand | aggregate demand curve | slope | aggregate expenditures | price level | money | purchasing power | real-balance effect | net-export effect | consumption expenditures | investment expenditures | government purchases | net exports | interest rate | investment borrowing | capital | durable good |


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INTEREST-RATE EFFECT, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: May 28, 2022].


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INVESTMENT BUSINESS CYCLES

The notion that business cycles are caused by changes in business sector investment expenditures triggered by the natural ebb and flow of market conditions. This investment explanation of business-cycle instability rests on the proposition that the seeds of each subsequent business-cycle phase are planted during the current phase. An expansion creates the conditions that cause a contraction and a contraction creates the conditions that cause an expansion. This explanation suggests a critical role for government intervention and stabilization policies to correct the business-cycle problems of inflation and unemployment.

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