Wealth Effect

The wealth effect is the economic phenomenon in which individuals spend more when stock prices increase and, as a result, equity portfolios are increasing in value. They do so because their sense of the reliability of their wealth is increasing. Thus, increases in consumer spending are directly correlated to increases in the value of stock…
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What is Economic Growth?

The economic growth of a country is the increase in the market value of the goods and services produced by an economy over time.Economic Growth Definition We define economic growth in an economy by an outward shift in its Production Possibility Curve (PPC). Economic growth is measured by the increase in a country’s total output or real Gross…
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Relative Poverty

There are two main ways in which poverty is measured: relative and absolute poverty.Relative poverty is the level of poverty which changes depending on the context--it’s relative to the economic context in which it exists. Relative poverty is present when a household income is lower than the median income in a particular country.Thus, in…
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Regulatory Capture

Regulatory capture is a failure of normal government functions in which regulatory agencies become subservient to the industries they are meant to be monitoring and regulating. In these cases, the regulatory bodies end up furthering the (typically economically-motivated) goals and concerns of special interest groups, rather than the public--so the…
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The Economics of Happiness

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of HappinessThe American Declaration of Independence As a Brit, I have always been envious that the US, at its birth, spelt out in no uncertain…
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The Fisher Effect

The Fisher Effect demonstrates the connection between real interest rates, nominal interest rates, and the rate of inflation. According to the Fisher Effect, the real interest rate is equal to the nominal interest rate minus the expected rate of inflation (note that in this equation, all rates used should be compounded).The result, in practice,…
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