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RISK PREMIUM: This has two very closely related uses. First, it's what risk averse people are willing to pay to avoid a risky situation. For example, if you would be equally happy with a guaranteed $900 or a 50-50 chance of getting either $500 or $1,500, then you're risk premium is $100. Second, it's the extra percentage points added to an interest rate to compensate for the risk of a loan. As a general rule, each 1 percent chance of default on a loan adds a risk premium of about 1 percent to the interest rate.

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MODEL

An abstract representation of the real world that is usually based on scientific theories, principles, and hypotheses. A model is used to analyze economic phenomena by focusing on a small number of essential aspects of the real world. It is then manipulated to derive conclusions and implications that can be applied to the real world.

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Today, you are likely to spend a great deal of time looking for a downtown retail store wanting to buy either a T-shirt commemorating the second moon landing or a coffee cup commemorating Thor Heyerdahl's Pacific crossing aboard the Kon-Tiki. Be on the lookout for poorly written technical manuals.
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In the Middle Ages, pepper was used for bartering, and it was often more valuable and stable in value than gold.
"Success is going from failure to failure without a loss of enthusiasm. "

-- Winston Churchill, British statesman

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Consumer Price Index-Urban Wage Earners and Clerical Workers
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