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Basic Concepts Articles;

Aggregate Supply

Defining aggregate supply

Aggregate Supply

Having looked at the components of aggregate demand, we now turn to the supply-side of the economy.

Agricultural Price Supports

Most governments around the world intervene actively in the operation of their agricultural markets.

Balance of Payments

The balance of payments provides us with important information about whether or not a country is “paying its way” in the international economy.

Bonds

Bond markets are important components of capital markets. Bonds are fixed-income securities—securities that promise the holder a specified set of payments.

Capital Investment and Spending

Investment is spending by UK firms on capital goods such as new factories, plant or buildings, machinery & vehicles. It is an important component of demand, but as we shall see, it also has an impact on the supply-side of the economy.

Consumer Spending and Saving

Consumption accounts for 65% of aggregate demand. There are many factors that affect how much people are willing and able to spend. It is important to understand these factors because changes in consumer spending have an important effect on path of the economic cycle.

Demand

One of the most important building blocks of economic analysis is the concept of demand. When economists refer to demand, they usually have in mind not just a single quantity demanded, but what is called a demand curve. A demand curve traces the quantity of a good or service that is demanded at successively different prices.

Economic Growth

Growing economies provide the means for people to enjoy better living standards and for more of us to find work.

Employment and Unemployment-2

We now turn our attention to the labour market and consider why people find themselves out of work and cannot find a paid job.

Exchange Rates

This chapter looks at the currency markets where the value of one currency against another is determined on a daily basis

Fiscal Policy

Fiscal policy involves the use of government spending, taxation and borrowing to influence both the pattern of economic activity and also the level and growth of aggregate demand, output and employment

GDP data easily misunderstood

For many years, the United States has imported more physical goods than it exports. When the government reports how much our economy is producing, imports often are blamed for reducing output.

Government Borrowing & the Budget Deficit

The level of government borrowing is an important part of fiscal policy and management of aggregate demand in any economy.

Government Macroeconomic Policy

A central issue in macroeconomics is whether or not markets, left alone, automatically bring about long run economic equilibrium.

Inflation

What causes rising prices in an economy? And what tools are available to keep inflation under control? This chapter focuses on the causes of inflation and some of the consequences.

International Trade

Officially, the unemployed are people who are registered as able, available and willing to work at the going wage rate but who cannot find work despite an active search for work.

Junk Bonds

Junk bonds, also known more respectfully as high-yield securities, are debt instruments that are issued by corporate borrowers and which the major bond-rating agencies say are less than "investment grade."

Macroeconomic Equilibrium

Macro-economic equilibrium is established when AD intersects with SRAS.

Macroeconomic Objectives and Policy Trade-offs

It is rare for any government to be able to meet all its objectives at the same time. The complexity of the economy and the limitations of economic policies make this a really tough task!

Measuring National Income

We need information on how much spending, income and output is being created in an economy over a period of time.

Monetary Policy

Monetary policy influences the decisions that we make about how much we save, borrow and spend.

Multiplier and Accelerator Effects

An initial change in aggregate demand can have a much greater final impact on the level of equilibrium national income.

Profits

In a capitalistic society, profits—and losses—hold center stage. Those who organize production efforts (the capitalists) do so to maximize their income (profits). Their search for profits is guided by the famous "invisible hand" of capitalism: the highest profits are to be found in producing the goods and services that potential buyers most want.

Real Business Cycles

The Classical Model builds on the principles developed in microeconomics to explain how equilibrium production and employment might be determined from profit maximizing behavior and utility maximizing behavior.

Supply

The most basic laws in economics are those of supply and demand. Indeed, almost every economic event or phenomenon is the product of the interaction of these two laws. The law of supply states that the quantity of a good supplied (that is, the amount that owners or producers offer for sale) rises as the market price rises, and falls as the price falls.

Supply-side Policies

Supply-side economic policies are mainly micro-economic policies designed to improve the supply-side potential of an economy, make markets and industries operate more efficiently and thereby contribute to a faster rate of growth of real national output

The Classical Model

The Classical Model builds on the principles developed in microeconomics to explain how equilibrium production and employment might be determined from profit maximizing and utility maximizing behavior.

The IS/MP Model

The IS/MP Model replaces the LM curve in the IS/LM Model with a monetary policy (MP) curve and changes the vertical axis from the nominal interest rate to the real interest rate.

The Keynesian IS/LM Model

The Keynesian IS/LM Model explains how the economy can be in equilibrium even with unemployment in the labor market.

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