What's it: The real exchange rate is the price of one currency against another currency adjusted for differences in the price levels of domestic and foreign prices. The aggregate price level measure is inflation, which shows you the currency's
Economic Context
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
Financial Account: Understanding Investment Flows in the Balance of Payments (Components)
Financial accounts act as a vital compass for understanding a country's investment activity on the global stage. They're a key component of the balance of payments (BoP), meticulously tracking the flow of investments between a country and the rest of
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
Arc Elasticity: Meaning, How to Calculate, Difference with Point Elasticity
What's it: Arc elasticity is a measure of elasticity based on two given points. Suppose you measure the own-price elasticity of demand. In that case, it is the percentage change in quantity demanded divided by the percentage change in price
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
Trade Sanctions: A Tool for Change (Reasons, Effectiveness, Types, Impact, Pros, Cons)
What's it? Trade sanctions are formal penalties for a country to stop or reduce the purchase or sale of goods. The sanctioner may be a country with a strong economy, such as the United States, or several countries together or through an international
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
Eurozone: Currency Union, Economy & Impact (Benefits, Drawbacks, How It Works)
What's it: The Eurozone is an area of the European Union (EU) that adopts the Euro as its official currency. Of the 28 EU members, nineteen of them adopted the Euro as their currency, namely France, Germany, Austria, Belgium, Cyprus, Estonia,
Economic Efficiency: Meaning, Prerequisites, Why It Matters
What’s it: Economic efficiency is the state in which resources are allocated to the economy's highest value uses. It involves making the best possible use of resources and avoiding waste.Under these conditions, no subsequent allocation of
First-Degree Price Discrimination: Examples, Prerequisites, Problems
What's it: First-degree price discrimination is a type of price discrimination in which producers charge each customer the highest price they are willing and able to pay. We also call this perfect price discrimination.Types of price