Movements along and Shifts in Aggregate Demand and Supply Curves
Aggregate demand (AD) and aggregate supply (AS) curves address economic issues such as expansions and contractions of the economy, causes of inflation, and changes in unemployment levels. Movements along these curves are caused by price level variations, while shifts of…
Aggregate Supply
Aggregate supply refers to the total amount of goods and services that firms in an economy are both willing and able to sell at a given price level. We must differentiate between the short- and long-run aggregate supply curves. The…
Aggregate Demand
Aggregate Demand (AD) represents the quantity of goods and services that households, businesses, and government and international customers want to buy at any given level of prices. Aggregate Supply (AS) represents the quantity of goods and services that producers are…
Fundamental Relationship Among Saving, Investment, Fiscal Balance, and Trade Balance
Saving and investing are often used interchangeably, but there is a difference between them. Saving is setting aside money for emergencies or a future purchase. On the other hand, investing is buying assets such as real estate, stocks, or bonds…
Measures of Central Tendency
Measures of central tendency are values that tend to occur at the center of a well-ordered data set. As such, some analysts call them measures of central location. Mean, median, and mode are all measures of central tendency. Even then,…
Comparing GDP, National Income, Personal Income, and Personal Disposable Income
GDP GDP stands for Gross Domestic Product. It refers to the market value of all goods and services produced within an economy in a given period of time. Equivalently, GDP also refers to the total income earned by each household,…
Nominal GDP, Real GDP and GDP Deflator
It is economically healthy to exclude the effect of general price changes when calculating the GDP. This is because higher (lower) income caused by inflation does not indicate a higher (lower) level of economic activity. Real GDP Economists describe real GDP…
Value-of-Final-Output and Sum-of-Value-Added Methods of Calculating GDP
There are two approaches used in the calculation of the Gross Domestic Product (GDP). The first one is the income approach. This method measures GDP as a summation of all income generated in the economy in a given year. The…
Calculating GDP using Expenditure and Income Approaches
The aggregate output of an economy is the value of all the goods and services produced within a predetermined period of time. On the other hand, aggregate income refers to the economic value of all payments received by the suppliers…
Market Structure within which a Firm Operates
Economists focus on the nature of competition and the pricing model in a particular market when describing a market structure. Since firms price their products based on the market structure, pricing, therefore, depends on competition. A market structure is often…
