The multiplier effect shows by how much final national income increases following an initial injection of spending or investment into the economy. How Does the Multiplier Effect Work? When money is injected into an economy — say, through government spending — it does not simply create a one-time boost. That initial spending becomes someone's income, who then spends a portion of it, which becomes...
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What is GDP Per Capita and how is it calculated ?
What is GDP Per Capita? GDP per capita is one of the most widely used indicators of a country's standard of living and economic performance. It tells us, on average, how much economic output each person in a country is responsible for producing — or equivalently, the average income per person. GDP per capita = GDP (Gross Domestic Product) ÷ Total Population Understanding GDP First GDP (Gross...
Commodity Money vs Fiat Money
There has been numerous stories about exchanges of goods as a form of money in different circumstances . Like there were Cigarettes used in WWII by the prisoner of War camps, beads used by north american Indians , cattle in south Africa, and small green scraps of paper in north america. Now there are various kinds of money that are divided into two groups : Commodity money and Fiat Money...
Major problem with using GDP
GDP is considered to be the most simplest and common economic statistics that measures the economic activity of the economy that takes place within a year - that leads to the analysis and conditions of various factors such as investments, household consumption , government expenditure etc. Yet GDP has considerable problems that cannot be ignored. The problem of GDP is more associated to the way...
Difference between aggregate supply and market supply curve
By definition, the Aggregate Supply curve shows the relationship between the Aggregate Quantity Supplied by all the businesses and firms of an economy and the over price level. The sum of the individual supply curve is not the aggregate supply curve. Why? To know more details about the Aggregate Supply we need to understand how the firms operate in certain ways that make up changes in the...
What is Money ?
To explain it with a formal definition Money is : Anything that is accepted as a way of exchange to buy products and services The basics mechanics of the whole monetray system are invisible. Many individuals take money for granted when they are spending it. So when you walk in a restaurant, shop or anywhere. Whatever it is, these pieces of paper along them can assist them anywhere. So why on...
Shifts in Aggregate Demand Curve
We just assumed that the Monetary and fiscal policy variable are kept constant when deriving the Aggregate Demand Curve. So any changes made in the following variable will shift the curve. Money Supply Consumption (household spending) Investment Government Expenditure Graphically An increase in the Supply of Money at a given price level will shift the Aggregate Demand curve Upwards (or right...
Everything about GDP (Gross Domestic Product)
I have made an amalgamation of all the posts that I and my contributing writers have written about GDP Please leave a Message if you require further notes and lectures regarding the concept of GDP. What is GDP ? GDP growth rate and Calculation Types of GDP (Nominal GDP and Real GDP) Difference Between GDP and GNP Three Approaches of Calculating GDP Measuring living index by GNI compared to GDP...
Dependent, Independent and Conditional Probability
Independent and Dependent Events The events A and B are said to be independent if the occurrence or non-occurrence of event A does not affect the probability of occurrence of B. This means that irrespective whether event A has occurred or not, the probability of B is going to be the same. If the events A and B are not independent, they are said to be dependent. For example, if we toss two coins,...
Probability with examples
Probability Definition ”If an experiment can result in n equally likely, mutually exclusive and exhaustive outcomes and m of which are favorable to the occurrences of an event A, the probability that the event A will occur is given by the ratio m/n. Symbolically, the probability of occurrence of the event A, denoted by P(A), is given by P(A)=m/n.Therefore, Probability Examples 1. When a fair...
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