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Business Cycle
Recurring periods of growth and decline (or expansion and contraction) in an economy's real output or real GDP
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Recovery, Peak, Recession, Trough
The phases of the business cycle during which real GDP or output increases, reaches its maximum, falls and reaches its minimum, respectively
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Total or Aggregate Spending
The total combined spending of all units in the economy (households plush businesses plus government plus foreign) for the new goods and services.
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Personal Consumption Expenditures
Household spending on new goods and services.
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Income-Determined Spending
Household spending on new goods and services that comes from income earned from providing resources to producers.
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Transfer Payment
Money from the governmnet for which no direct work is performed in returned.
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Nonincome-Determined Spending
Spending that is generated from sources other than household earned income.
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Injections into the Spending System
Spending that comes from a source other than household earned income; nonincome-determined spending.
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Financial Institutions
Organizations such as banks, credit unions, and insurance companies that provide a means for channeling saving into borrowing
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Leakages from the Spending Stream
Uses for earned income other than spending, such as paying taxes and saving.
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Investment Spending
Business spending on new goods, such as machinery, equipment, buildings, and inventories; nonincome-determined spending.
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Retained Earnings
The portion of a buisness' accumulated profits that has been retained for investment or other purposes.
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Saving-Borrowing Relationship
The relationship between the amount saved by households and businesses and the amount returned to the spending stream through business and household borrowing.
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Government Purchases of Goods and Services
Government spending on new goods and services; nonincome-determined spending.
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Exports
Goods and services that are sold abroad
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Imports
Goods and services purchased from abroad.
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Net Exports
Exports minus imports; is positive when exports exceed imports and negative when exports exceed exports.
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Multiplier Effect
The change in total output and income generated by a change in nonincome-determined spending is larger than, or a multiple of, the spending change itself.
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Expectations
Anticipations of future events; can affect current actions by households and businesses and the likelihood that the future events will occur.
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Fiscal Policy
Influencing the levels of aggregate output and employment or prices through changes in federal government purchases, transfer payments and/or taxes.
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Monetary Policy
Influencing the levels of aggregate output and employment or prices through changes in interest rates and the money supply.
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