A priori arguments

Definition a priori: An a priori argument is one where certain basic principles are assumed to be true. Therefore, it is not necessary to use empirical evidence but rely on the axioms being true. A priori contrasts with A posteriori – which is arguments based on evidence and facts. An example of a priori in …

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Ability to Pay

Ability to pay refer to whether individuals have the effective income to be able to purchase a good. The ability to pay is often used as the justification for a fair tax. A good tax should have various attributes one of which is equality. A fair tax should reflect the ability to pay. For example, …

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Absolute Advantage – definition and examples

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Absolute advantage means that an economy can produce a greater total of goods for the same quantity of inputs. Absolute advantage means that fewer resources are needed to produce the same amount of goods and there will be lower costs than other economies. Simple example of absolute advantage In this example, Brazil has an absolute advantage …

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Absorbed costs

Absorbed costs involve including all the variable and fixed costs in producing a unit of output. For example, in producing a motor car, the absorbed costs include the variable raw material costs and the associated fixed manufacturing costs, such as the factory, safety inspections and maintenance of machines. Absorbed costs would not include general administration …

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Absorption in economics

Absorption is not a common term but refers to the total level of spending that occurs in an economy. It includes import spending but excludes exports. It shows the total amount of consumption by people in an economy regardless of the origin of the goods and services. Absorption includes spending on all goods and services. …

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Accelerated Depreciation

Definition of Accelerated Depreciation: When goods are written off more quickly than usual to help reduce companies tax bills and encourage investment. Depreciation refers to how the value of a firm’s capital stock reduces over time. For example, if a firm invests in a factory costing £1 million. Then it may predict a depreciation of …

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Accommodative monetary policy

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Accommodative monetary policy means a policy of allowing the money supply to rise in line with national income and the demand for money. Accommodative monetary policy will also usually involve lower interest rates. Accommodative monetary policy may also be known as ‘easy monetary policy’ / loose monetary policy / expansionary monetary policy. The aim of …

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Actuary definition

An actuary is a person who works with complex mathematical models to try and predict the likelihood of future events. An actuary is particularly important for the insurance industry. An actuary looks at the average propensity for disastrous events to occur and uses these percentages to try and predict a fair price to set insurance …

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