Browsing Category

Macroeconomics

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…
Read More...

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…
Read More...

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…
Read More...

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…
Read More...

Marginal Propensity to Consume

The marginal propensity to consume (MPC) is the increase in consumer spending due to an increase in income. This can be expressed as ∆C/∆Y, which is a change in consumption over the change in income.For example, if a person earns an extra $10, and then spends $7.50 from the $10, then the marginal propensity to consume will be $7.5/10 = 0.75.…
Read More...

Discretionary Fiscal Policy

A discretionary fiscal policy is a government policy that changes government spending or taxes. Its purpose is to expand or shrink the economy as needed.The output is determined by the level of Aggregate Demand (AD), so a discretionary fiscal policy can be used to increase Aggregate Demand and thus also increase the output. This measure would…
Read More...