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Macroeconomics

Supply Side Policies

Supply Side Policies are policies aimed at increasing Aggregate Supply (AS), a shift from left to right. They enhance the productive capacities of an economy while improving the quality and quantity of the four factors of production. However, supply side policies are difficult to implement and take time to take effect. Successful policies lower…
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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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Unemployment

A person is considered to be unemployed if he doesn’t currently doesn’t have a job and is actively searching for one. When we look at the unemployment rate, we consider someone who is actively seeking a job. Otherwise, we do not count them in the labor force. The Bureau of Labor Statistics classifies actively seeking as someone who has "actively…
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Four Components of Aggregate Demand

There are four components of Aggregate Demand (AD); Consumption (C), Investment (I), Government Spending (G) and Net Exports (X-M). Aggregate Demand shows the relationship between Real GNP and the Price Level. Four Components of Aggregate Demand Any increase in any of the four components of aggregate demand leads to an increase or shift…
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The Trade Cycle

The different phases an economy goes through over time, such as booms and recessions, is known as the business or the trade cycle or the business cycle. The line through the trade cycle is called the trend line, which shows that the economy is always moving upwards or growing in the long run. Phases of the Trade Cycle The Trade…
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