What's it: Wage rigidity refers to a situation where wages are insensitive to changes in supply-demand in the labor market. For instance, when the unemployment rate is high, wages do not fall even though the demand for labor declines and
Macroeconomics
Natural Rate of Unemployment: The Explanation
What's it: The natural rate of unemployment (NARU) is the unemployment rate when the economy is operating at full employment. Sometimes, it is equated with the non-accelerating inflation rate of unemployment (NAIRU), which is the
Consumption Expenditure: Type, Determinants, Impact
What's it: 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
Economic Shock: Types, Causes, Impacts
What's it: An economic shock is a sudden and unexpected significant change in an economy's output due to changes in external factors. Shocks suddenly cause the aggregate supply curve or demand curve to shift to the right or left. Such events not
Long-Run Macroeconomic Equilibrium and Its Explanation
What's it: Long-run macroeconomic equilibrium occurs when the aggregate demand curve intersects the short-run aggregate supply curve at the point of the long-run aggregate supply curve. In other words, the short-run macroeconomic
How Consumption Expenditure Affects the Economy
In macroeconomics, consumption expenditure affects the economy through aggregate demand. Economists include it as an item in aggregate demand in addition to business investment, government spending, and net exports. Thus, when consumption expenditure
How does Unemployment Impact Individuals, Society, Businesses, and the Economy?
Unemployment has wide implications. It doesn't just have consequences on the individual. But, it also impacts society, business, and the economy. For example, unemployment causes: Higher poverty and crimeDecrease in business revenueIncreased
Short-run Macroeconomic Equilibrium and Its Implications for the Economy?
What's it: A short-run macroeconomic equilibrium occurs when the aggregate demand curve and the short-run aggregate supply curve intersect. It determines the actual output (real GDP) and the price level in the economy. Equilibrium may be
Which Factors Affect Consumption Expenditure?
Several factors affect consumption expenditure. Disposable income comes first. Without it, there is no income to buy the product. Other factors include consumer confidence, wealth, income expectations, inflation, and interest rates. Why is it