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Macroeconomics

The 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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Liquidity Preference Theory

The Liquidity Preference Theory says that the demand for money is not to borrow money but the desire to remain liquid. In other words, the interest rate is the 'price' for money. John Maynard Keynes created the Liquidity Preference Theory in to explain the role of the interest rate by the supply and demand for money. According to Keynes, the…
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Five Macroeconomic Goals

Every country has macroeconomic goals that it wants to achieve, these goals or objectives are key to ensuring long-term stable economic success. These are the five main macroeconomic goals that most central banks aim to achieve. For example, the U.S. Federal Reserve targets the inflation rate at roughly 2%. Five Macroeconomic Goals 1.…
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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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