Increased access to cheaper and more varied goods and services is key benefits of international trade. Thus, it allows us to increase well-being. We can satisfy our needs and wants by buying more varied and cheaper products not produced
Economics
Injections and Leakages in the Circular Flow of Income: Examples and Impacts
What's it: Injection and leakage illustrate how income in the economy does not flow entirely in a circular flow diagram. Leakages refer to withdrawals, for example, due to savings, taxation, and imports. They are withdrawn because income is not
Autarky: Examples, Pros, and Cons
What's it: Autarky is a system or philosophy in which an economy seeks to be self-sufficient. If a country adopts this system, it will try to meet its needs from within. And suppose the country is not involved
Adverse Economic Shocks: Examples, Impacts, Solutions
What's it: An adverse economic shock is a sudden, unexpected, and dramatic change in aggregate supply and demand, hurting the economy. For example, shocks result in high and uncontrollable inflation. Or it causes a recession. In other cases, it
Wage Rigidity: Reasons and Implications
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
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