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
Economic Context
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.
Fiscal Multiplier Explained: Impact of Government Spending on the Economy – Formula, Criticisms
Fiscal Multiplier is a powerful concept in economics that helps us understand the impact of government spending on an economy's overall health. It measures how much a change in government spending, either through increased spending or tax cuts,
Government Debt: Impact on the Economy (Pros, Cons)
Government debt, the money borrowed by a country to finance its operations, is a ubiquitous concept in today's world. It's a topic that sparks debate among economists, investors, and everyday citizens alike. But how exactly does government debt work?
Marginal Propensity to Save (MPS): Impact on Investment and Growth [Formula, Determinants]
Marginal Propensity to Save (MPS) is a key concept in economics that helps us understand how changes in income affect household saving behavior. It essentially measures the portion of additional disposable income that households choose to save for
Understanding Private Savings: The Fuel for National Growth
Private savings are the lifeblood of a nation's economic potential. They represent the money households and businesses set aside, rather than spending it all on consumption. High levels of private savings contribute to a country's overall savings and
Absolute Convergence: Do Developing Countries Catch Up to Developed Ones?
Absolute convergence is an economic theory that sparks debate: Can developing countries eventually reach the same level of economic output per person as developed countries? This concept hinges on the idea that developing economies have a key
Consumer surplus: Definition, Formula and Implication
What's it: Consumer surplus refers to the difference between the highest price consumers are willing to pay and the actual price they pay for a good or service.For example, you are willing to pay Rp6 to buy a product. In the market, you come
Mixed Economy: Meaning, Characteristics, Pros, Cons
Most countries adopt a mixed economy. A free-market economy contains weaknesses, as does the command economy. As a result, mixing the two economic systems is a reasonable choice. But, whether it is the best, you can try to conclude after reading the
Disposable Personal Income: How Much Can a Household Really Spend?
Disposable personal income (DPI) acts as a crucial indicator of individual spending power within a nation's economy. It reflects the money remaining in households' pockets after taxes and other mandatory deductions are subtracted from national
Demand Shocks: Causes, Impacts, and Investment Strategies
Demand shocks are sudden jolts to the economy that disrupt the normal balance between supply and demand for goods and services. Imagine a wave unexpectedly crashing over a market - that's the essence of a demand shock. These disruptions can be
Macroeconomic Policy: Tools for Growth, Inflation and Employment [Types, How They Work]
Macroeconomic policy plays a central role in shaping the overall health and direction of a nation's economy. Governments enact these policies to achieve specific macroeconomic goals, influencing factors like economic growth, inflation, employment,