Gross investment encompasses the money businesses spend on both expanding their capabilities and simply keeping existing equipment running smoothly. This includes buying new factories, machinery, and other physical assets to increase output, but also
Economic Context
What is the difference between a change in demand and a change in quantity demanded?
The difference between a change in demand and a change in quantity demanded lies in the determining factor. Economists use the first term to describe the effect of a non-price factor on a change in quantity. Meanwhile, they use the second term to
Gross Private Domestic Investment: Understanding Its Components and Impacts
Gross Private Domestic Investment (GPDI) represents private sector investment spending. It is one component of aggregate demand, along with household consumption, government spending, and net exports.Investment growth contributes to increasing
Price Stability: Cornerstone of a Healthy Economy
Price stability is the dream scenario for a healthy economy. Imagine a world where you can plan your finances with confidence, knowing the price of groceries or that new gadget won't drastically fluctuate overnight. This economic sweet spot, where
Law of Supply
Law of supply states quantity supplied of good has a positive correlation with its own-price, ceteris paribus. If the price of a product rises, the quantity supplied will increase. A higher price encourages producers to increase output to get more
Understanding Consumption Expenditure: Types and Examples
Consumption expenditure refers to the money individuals spend on goods and services. In economics, we can also say it is the residual disposable income after saving. Economists assume individuals allocate their income for two purposes: consumption
From Disposable Income to Interest Rate: Key Determinants of Consumption Expenditure
While government policies often aim to stimulate consumption, several key determinants of consumption expenditure must be understood to achieve this goal. These determinants include factors like disposable income, consumer confidence, wealth, income
Market Equilibrium: Meaning, How It Works
Market equilibrium occurs when the quantity demanded is equal to the quantity supplied. In a curve, it represents the point of intersection between the demand curve and the supply curve.At the equilibrium point, the market determines prices and
Breaking Down GDP by Spending: The Expenditure Approach Explained
The expenditure approach is a key method that illuminates GDP by analyzing the final spending within an economy. This approach delves into how various sectors—households, businesses, governments, and even foreign trade—contribute to overall economic
Economic Boom: The Thrills and Spills of Rapid Growth
Economic boom – a period of exhilarating economic growth marked by surging production, robust consumer spending, and a thriving job market – represents the zenith of the business cycle. It's a time of prosperity that excites businesses, empowers
Mastering the Income Approach in GDP Calculation
Gross Domestic Product (GDP) is a cornerstone economic metric, reflecting a nation's overall health. To calculate this crucial figure, economists utilize various methods, with the income approach focusing on the total income generated within an
Market Mechanism: Meaning, How It Works
In economics, a market mechanism refers to a system of market work in which the power of supply and demand determines the price and quantity of goods traded. This mechanism allows the market to go to a new equilibrium point when disequilibrium