Category: Macroeconomics

The real GDP growth rate shows the percentage change in a country’s real GDP over time, typically from one year to the next. That means it measures by how much the economic output, adjusted for inflation, increases or decreases over a year. It can be calculated using the following formula: […]

Marginal propensity to save (MPS) describes the share of additional income that a consumer saves. That means it describes the percentage of additional income they spend on saving instead of buying goods or services. Thus, marginal propensity to save can be calculated as the change in saving (ΔS) divided by […]

GDP is defined as the market value of all final goods and services produced within an economy over a specific period (usually one year). There are two primary methods to calculate GDP: the income approach and the expenditure approach (see also Gross Domestic Product). According to the income approach, GDP […]

GDP describes the monetary value of all final goods and services produced within an economy over a specific period (usually one year). There are two main methods to calculate GDP: the expenditure approach, and the income approach (see also Gross Domestic Product). According to the expenditure approach, GDP can be […]

Inflation describes an increase in the overall price level of goods and services within an economy over a certain period. As a consequence, the purchasing power of money decreases, which means the money loses some of its value. Thus, inflation has an impact on the cost of living and the […]

Negative externalities often cause markets to fail, i.e. to reach an inefficient outcome for society as a whole. When that happens, the government can respond in one of two ways. It can use command-and-control policies to directly regulate problematic behavior, or it can use market-based policies to provide incentives that […]

In our globalized economy international trade is one of the most critical drivers of economic growth. While virtually all countries engage in international trade, some of them are more active than others. We have already created a list of the world’s top 10 countries by exports a while ago.  But for […]

International trade is one of the most important drivers of economic growth. Most countries export a significant share of the goods and services they produce to other countries. These exports are extremely important, because they have a direct impact on economic growth, employment, and the standard of living within the […]

The consumer price index (CPI) is a measure of the overall price level of goods and services bought by a typical consumer in a particular economy.  Its goal is to measure the cost of living and show the effects of inflation on individual consumers. However, like most indicators, the CPI […]

The Gini index (i.e. the Gini coefficient) is a statistical measure of distribution, developed by Corrado Gini in 1912. In an economic context it is commonly used as an index of economic inequality that measures income or wealth distribution among the population. The index ranges from 0 to 1, although […]