Precautionary demand for money might sound complex, but it simply refers to the cash we hold as a buffer against unexpected events. Life throws curveballs, and having a financial safety net provides peace of mind. This demand for readily available
Macroeconomics
Monetarist View: How Money Supply Impacts Growth and Inflation
Monetarists refer to economists who hold a strong belief that changes in the money supply are the main determinants of economic performance and business cycle behavior. In their argument, the economic health of a country depends on monetary supply or
Keynesian Economics: Core Concepts, Government Role During Business Cycle
Keynesian Economics revolutionized the way we perceive and understand economic fluctuations and the role of government intervention. Developed by the influential economist John Maynard Keynes in the aftermath of the Great Depression, this influential
Reserve Requirement: Bank “Vault Cash” & Money Supply – Impacts
Reserve requirement is a regulation that commercial banks must follow. It dictates a specific portion of customer deposits that banks are obligated to hold onto as reserves. These reserves cannot be used for lending and function as a safety net for
Fiscal Policy Explained – A Guide for Students and Investors [Tools, Pros, Cons]
Fiscal policy plays a central role in shaping a nation's economic health. It's a set of government actions that directly influence the economy through adjustments to government spending and tax rates. This guide dives deep into the world of fiscal
Fiscal Stance Explained: How Gov’t Spending Affects Economy
Fiscal stance is a crucial concept in economics that refers to how a government uses its spending and tax policies to influence the overall health of the economy. In simpler terms, it's about how a government decides to allocate its budget to steer
Monetary Transmission Mechanism: How Monetary Policy Impacts the Economy
The monetary transmission mechanism refers to a process in which the policy rate is transmitted through the economy and ultimately affects the inflation rate. The policy rate, also known as the benchmark rate, is a key tool used by central banks in
Monetary Policy’s Limits: Is Monetary Ineffective?
There are situations where monetary policy can prove ineffective in stimulating the economy or curbing inflation. Monetary policy, a cornerstone of economic management, is often touted as a powerful tool for steering economic growth and inflation.
Unit of Account: Measuring Value (Why Money Matters)
The concept of "Unit of Account" sits at the very foundation of any economy. It's the common language we use to measure the value of everything we buy, sell, or own. Just like a ruler helps us measure the length in centimeters or inches, money, as a
Full Employment: Understanding the Ideal Economic State
Imagine an economy where everyone who wants a job can find one. This ideal state, known as full employment, represents a healthy economic balance with maximized productivity and minimal unemployment. However, achieving and maintaining full employment
Money Supply: Impacting Inflation and Growth (Measures, Components, Impacts)
Money supply is the aggregate amount of money circulating in the economy. Its measures vary among countries and typically include cash, coins, and balances in current and savings accounts.Imagine it as the lifeblood of the economy, constantly
Real GDP: Formula, How to Calculate, Determinants
Real gross domestic product (real GDP) is a cornerstone metric used to assess the health of an economy. It measures the total market value of all goods and services produced in a country, adjusted for inflation to provide a clearer picture of actual