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Macroeconomics

The Circular Flow of Income

The Circular Flow of Income shows how different units in an economy interact. It shows how household consumption is a firm's income, which pays for labor and other factors of production, and how those firms provide households with income. The Circular Flow of Income demonstrates how Economists calculate national income or Gross Domestic Product.…
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The Business Cycle

The different phases that an economy goes through over time, such as periods of booms (expansions) and economic recessions (contractions), is known as the business cycle or the trade cycle. One entire business cycle is the completion of an expansion and a contraction sequentially.The line through the business cycle is known as the trend line,…
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Structural Unemployment

Structural unemployment results from mismatches between the skills required for available jobs and the skills held by the unemployed. Even when there is plenty of job availability, this mismatch means the unemployed cannot access jobs that fit their skill sets.Structural employment is often rooted in major economic shifts. Deindustrialization…
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Laffer Curve

The Laffer Curve was conceptualized for modern economies by Arthur Laffer during a meeting in which he argued against President Gerald Ford's tax increase. The Laffer Curve shows the relationship between tax revenue collected by the government and tax rates paid by citizens. The tax rates depicted on a Laffer Curve range from 0% to 100%.The…
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Consumer Price Index (CPI)

The Consumer Price Index (CPI) is usually represented by a basket of goods or products. It measures the average change in the price of this basket of goods over a defined period of time. Economists and Policymakers widely use the Consumer Price Index as a measurement for the inflation rate. The CPI is also used as a deflator to convert other…
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Marginal Revenue

Marginal Revenue (MR) is the increase in the Total Revenue (TR) that is gained when the firm sells one additional (marginal) unit of that product. In other words, MR is the revenue obtained from the last unit sold.Marginal Revenue can remain uniform at a particular level of output. However, the MR will eventually slow down as the production…
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