The Multiplier Effect

The Multiplier Effect is defined as the change in income to the permanent change in the flow of expenditure that caused it. In other words, the multiplier effect refers to the increase in final income arising from any new injections.Injections are additions to the economy through government spending, money from exports and investments made by…
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Production Possibilities Frontier

The best way to show a country's available resources and the maximum two goods produced from those resources is a Production Possibilities Frontier (PPF). Production Possibilities Curve (PPC) is another name for the Production Possibilities Frontier.One of the first things to note is that, often Economists make assumptions in models; such as…
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Comparative Advantage

Adam Smith had advocated the theory of Absolute Advantage, where he argued that a country should produce a good if it can produce more of the good with the same or fewer resources than another country. This theory is different from Comparative Advantage. David Ricardo, another Economist, suggested that a country only needs to have Comparative…
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Types of Foreign Aid

Foreign aid is one the largest sources of foreign exchange. There are five different types of foreign aid programs. What is the definition Foreign Aid? Foreign aid is defined as the voluntary transfer of resources from one country to another country. This transfer includes any flow of capital to developing countries. A developing country usually…
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Introduction to Demand

In Economics, Demand is defined is the amount of good or service a consumer is willing and able to buy per period of time. It is very important to understand the term "willing and able". Many people want to buy products that they cannot afford at prices they cannot pay. Because they are not able to purchase, there we cannot include them in the…
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Absolute Advantage

According to Adam Smith (who is regarded as the father of modern economics), countries should only produce goods that they have an absolute advantage in. A country is said to have an absolute advantage if the country can produce a good at a lower cost than another. Furthermore, this means that fewer resources are needed to provide the same…
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