Core Macroeconomic Definitions & Formulas
This document provides a comprehensive reference for key macroeconomic terms, concepts, and essential formulas. Understanding these definitions is crucial for analyzing economic performance and policy.
Key Economic Indicators & Concepts
Gross Domestic Product (GDP) & Output
- GDP Omissions: GDP calculations do not include:
- Nonmarket Goods and Services
- Used Goods
- Financial Transactions
- Government Transfers
- Real GDP: The value of the entire output produced annually within a country’s borders, adjusted
Global Trade Dynamics & Economic Policy Insights
International Trade Fundamentals
Is there economic justification for dumping?
Answer: There is no good economic justification for dumping to be considered particularly harmful.
What is an advantage of specialization from international trade?
One advantage of the specialization that results from international trade is that countries can take advantage of:
Answer: Scale economies
What constrains production scale when trade opens?
When trade is opened, the scale of production possible in a country is constrained
Read MoreExternalities Explained: Market Failure & Economic Solutions
Understanding Externalities in Economics
An externality occurs when someone’s actions affect others without paying or being paid for it, and these effects don’t go through the market. The problem arises because the full social cost or benefit isn’t reflected in the price.
The Nature of Externalities
This concept explains externalities—situations where one person’s or firm’s actions affect the well-being of others outside the market system (i.e., not through prices).
Consider the example of Bart,
Read MoreCapitalism & Market Principles: Essential Economic Concepts
Core Principles of Capitalism
Voluntary exchange is a second characteristic of capitalism, defined as the voluntary act of buyers and sellers freely and willingly engaging in market transactions.
Another major feature of capitalism is private property rights, which allow people to own and control their possessions as they wish. Private property gives people the incentive to work, save, and invest.
The Profit Motive
The profit motive is the incentive to improve one’s material well-being.
Profit Defined
Profit:
Read MoreFundamental Economic Concepts: Principles & Market Dynamics
Central Problems of an Economy
An economy, whether capitalist, socialist, or mixed, faces scarcity of resources, leading to three central problems:
What to Produce
Due to limited resources, an economy must decide which goods and services to produce and in what quantity. Should it produce more consumer goods like food, clothes, and mobile phones, or capital goods like machinery and infrastructure? Since resources are scarce, choosing one means sacrificing another — this is known as opportunity cost.
Business Governance, Indian Economy & Sectoral Dynamics
Organizational Governance & Control Roles
Governance within an organization is a critical aspect of its overall functioning and success. It refers to the framework of rules, policies, procedures, and structures that guide and regulate the behavior and decision-making processes of the organization.
Effective governance is essential for several reasons:
- Accountability: Governance establishes clear lines of responsibility and accountability within an organization. It ensures that individuals and teams