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Most of the confusion comes from the fact that we're used to using "pound" as both a unit of force and unit of weight, and that we seldom stop to think about the fact that gravity isn't the same everywhere. If you take a pound weight up 1000 feet, it has 1000 foot-pounds of potential energy. If you then drop it, in the absence of air resistance, it will start to fall, and every second it will be falling 32 feet per second faster than it was a second before. In slightly less than eight seconds, it will be falling a little over 250 feet per second, and it will have fallen 1000 feet. If you plug 252 ft/sec and 1 pound into the proper formula, you'll get 1000 foot pounds, only now the potential energy it had a thousand feet up has been changed into kinetic energy by the force of gravity.
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