Does full employment mean no unemployment? The answer is no. When the economy operates at full employment, unemployment remains. The unemployment rate is not zero.Why not zero percent?Only the cyclical unemployment rate is zero percent during
Macroeconomics
Total Factor Productivity (TFP): Growth Engine Beyond Labor and Capital – Determinants
What's it: Total factor productivity quantifies the share of economic growth not explained by increases in labor and capital when both are used together in the production process. We also often refer to it as the residual Solow model or multifactor
New Classical Economics: Rethinking Markets and Macroeconomics
What's it? New Classical economics is an evolution of the classical schools of economics. It uses a neoclassical microeconomic approach to explain macroeconomic phenomena. It emphasizes the maximization of utility and the rational expectations of
Economic Inequality: Understanding the Gap (Causes, Measures & Solutions)
What's it: Economic inequality is the unequal distribution of income and economic opportunities between various groups in society. Inequality is a universal problem. You can see, it happens in all countries.The acute unemployment rate and
Short-Run Aggregate Supply: Curve, Determinants and Shifts
Short-run aggregate supply (SRAS) is a crucial concept in economics. It reveals how much an economy produces (real GDP) at different price levels. Unlike the long run, where all factors are adjustable, the short run has some "sticky" elements, like
Excess Capacity: Meaning, Measure, Impacts, Affecting Factors
What's it: Excess capacity is where production capacity is not fully utilized to achieve the minimum efficient scale. In other words, the firm produces at a lower output scale than it was designed for. Not only companies but this term can also
Disposable Income: Key to Understanding Consumer Spending [Impacts, Formula, Determinants]
What's it: Disposable income is the money you have left after paying taxes. You can use it for savings or to buy goods and services.Disposable income is essential to describe household purchasing power. When it increases, we expect
Capital Deepening: Boosting Productivity [Definition, Determinants, and Impacts]
What's it? Capital deepening is an investment in increasing the capital-to-labor ratio. It is one way to encourage economic growth and increase potential output in the long run.Assuming the supply of labor (as measured by the labor force) does
Aggregate Hours Worked: Measuring Productivity and Potential GDP [Formula, Calculation]
What's it: Aggregate hours worked refers to the total number of hours worked by the labor force in an economy during a given period. It represents the total time it takes for laborers to produce the gross domestic product in one year.Why
Harrod-Domar Model: Growth from Saving and Investment [Assumptions, Importance, Limitations]
What’s it: The Harrod-Domar model is an economic growth model that uses saving and investment as growth sources. The model takes two economists, Sir Roy Harrod and Evsey Domar, who independently developed the model in 1939 and 1946.The
Understanding the Macroeconomic Landscape: A Guide to Economic Actors and their Roles
The economy is a complex system, but at its core, it's all about people and the choices they make. These decision-makers are known as economic actors. They participate in economic activity by consuming goods and services, producing goods and
Austrian Economics: Unveiling the Market Through Individual Choices
Austrian economics offers a unique perspective on how markets function, emphasizing the role of individual choices and preferences. Unlike some economic schools that rely heavily on data and statistical analysis, Austrian economics utilizes logic and