Inflation can be a confusing topic, with terms like CPI and PPI thrown around. But there's another crucial player in the game: the Wholesale Price Index (WPI). Often overshadowed by its consumer-focused counterpart, the WPI offers valuable insights
Macroeconomics
Economic Contraction: Understanding Downturns [Causes and Impacts]
Economic contraction marks a period of economic decline, a downturn following a period of prosperity. It's a normal part of the business cycle, but understanding its causes and impact empowers various stakeholders to navigate these challenging times.
Frictional Unemployment Explained: Causes, Impacts, Solutions
Frictional unemployment occurs when unemployed workers have yet to find a suitable new job. It takes time for workers to move from one position to another, mainly for higher-paying jobs.And, for graduates, as they enter the labor force, they take
Supply-Constrained Economy: Limited Resources, Rising Prices (Explained)
A supply-constrained economy presents a unique challenge. In this scenario, an economy's potential for growth is hampered not by a lack of spending but by a fundamental limitation: a shortage of resources needed to produce goods and services. This
Money Creation Explained: How Banks Create Money
Money creation is the process by which the money supply in an economy expands. It's a fascinating concept that underpins economic activity and influences everything from interest rates to inflation. But how exactly does money get created? This guide
Money Multiplier: Understanding Money Creation – Formula, Impacts
The money multiplier explains how base money, also known as the monetary base, can grow exponentially through the money creation process within a fractional reserve banking system. Essentially, every new unit of base money injected into the economy
Money Neutrality Explained: Does Printing Money Boost the Economy?
Money neutrality is a concept in economics that tackles a fundamental question: does simply printing more money make an economy stronger? This theory argues that, in the long run, changes in the money supply only affect prices, not the actual
Open Market Operations: Central Bank Tool for Liquidity and Growth
An open market operation is the central bank's activity of buying and selling securities. It is an integral part of monetary policy tools, apart from policy interest rates and the change in reserve requirements ratio. The aim is to influence
Central Bank Lending Rate: Control Lever for Economy (Growth, Inflation)
The central bank lending rate is the interest rate that commercial banks pay when they borrow money directly from the central bank. It acts like a steering wheel for the economy, allowing the central bank to influence both short-term and long-term
Policy Rate: Central Bank’s Tool for Growth & Inflation (Impacts)
The policy rate, also known as the benchmark rate, is a powerful tool wielded by central banks to steer the economy. It's essentially the interest rate that the central bank charges commercial banks for borrowing money. By adjusting this rate,
Avoiding Double Counting in GDP: The Value-Added Approach to Calculate
Gross Domestic Product (GDP) serves as a key indicator, but errors can arise during calculation. One such error is double counting, which inflates the GDP figure by unintentionally counting the same good or service multiple times. This happens when
Cyclical Unemployment: Cause, Solution
Cyclical unemployment is an unwelcome companion to the business cycle, rising and falling in a predictable pattern. It decreases as the economic activity expands and businesses thrive, but increases as the economy contracts and companies struggle.