What macroeconomic problems do policy makers most commonly face?

July 7, 2024 No Comments

A: Macroeconomics addresses large-scale economic factors that affect the overall population. Policymakers therefore have to make macroeconomic decisions such as setting interest rates and balancing a country’s inflation with both its trade and the foreign exchange rate. Establishing financial conditions that facilitate an increase in

What is the Difference Between International Monetary Fund (IMF) and the World Bank?

July 7, 2024 No Comments

A: The primary difference between the International Monetary Fund (IMF), and the World Bank lies in their respective purposes and functions. The IMF exists primarily to stabilize exchange rates, while the World Bank’s goal is to reduce poverty. Both organizations were established as part of the

What is the difference between capital and consumer goods?

July 7, 2024 No Comments

A: Capital goods and consumer goods are classified based on how they are used. A capital good is any good deployed to help increase future production. The most common capital goods are property, plant and equipment, or PPE. Consumer goods are any goods that are

What is the difference between ceteris paribus and mutatis mutandis?

July 7, 2024 No Comments

A: Ceteris paribus and mutatis mutandis are Latin phrases commonly used as shorthand to explain certain ideas in economics and finance. Ceteris paribus can be translated into “all other things being equal” or “holding other factors constant.” This means that while considering the effect of

What is the difference between frictional unemployment and structural unemployment?

July 7, 2024 No Comments

A: Structural unemployment and frictional unemployment are two different types of unemployment that occur in an economy. Frictional unemployment is always seen in an economy and occurs during the period when workers are searching for jobs. Conversely, structural unemployment is caused by shifts in the

What is the difference between fiat money and representative money?

July 7, 2024 No Comments

A: Fiat money is physical money (paper money and coins), while representative money is something that represents intent to pay the money such as a check. Fiat money is backed by the government, and representative money can be backed by different things. For example, a

What is GDP and why is it so important to economists and investors?

July 7, 2024 No Comments

A: The gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific time period, often referred to as the size of

What happens when inflation and unemployment are positively correlated?

July 7, 2024 No Comments

A: Positive correlation between inflation and unemployment creates a unique set of challenges for fiscal policymakers. Policies that are effective at boosting economic output and bringing down unemployment tend to exacerbate inflation, while policies that rein in inflation frequently constrain the economy and worsen unemployment.

What happens when M2 money supply grows faster than the overall economy?

July 7, 2024 No Comments

A: Generally speaking, inflation occurs if M2 money supply expands faster than the rate of productive growth in the overall economy. This means prices are higher than they otherwise would have been. It’s important to distinguish between certain components of M2, however. Cash and checking

What is a diseconomy of scale and how does this occur?

July 7, 2024 No Comments

A: In economics, diseconomies of scale describes the phenomenon that occurs when a firm experiences increasing marginal costs per additional unit of output. It is the opposite of economies of scale. This is usually caused by an deployment problem with some of the factors of

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