Category: Macroeconomics

Financial Markets bring together individuals who want to save money with other individuals or companies who wish to raise money. The bond market and the stock market are the two most important types of financial markets. They provide capital through the issuing of bonds or stocks, respectively. Two fundamentally different […]

According to the Efficiency Wage Theory, firms can operate more efficiently and become more productive if they pay wages above the equilibrium level. There are four different theories, according to which firms can benefit in four different ways from paying efficiency wages: higher employee effort, lower employee turnover, attracting higher […]

Economics is all about efficiency. Most economic issues arise because of scarce resources. Starting from there, we often have to find ways to use, produce, and distribute those resources in the best possible way (i.e., efficient). However, depending on the issue we are looking at, there may be different factors […]

Poverty is a problem everywhere in the world. In some countries, it is more severe than in others, but some people are always forced to live below the poverty line. The poverty line describes an absolute level of income below which an individual or family is deemed to live in […]

The unemployment rate refers to the share of the total labor force that is without a job but actively seeking work. It is one of the broadest and most widely available indicators of economic activity. In every economy, there are always some people who lose or quit their jobs, while […]

The economy affects all of us. Hence, it is important to keep a finger on its pulse and constantly check where it is headed. Unfortunately however, that is easier said than done. Hundreds of economic reports and surveys are published every month, each of them including dozens of economic indicators and statistics. If you are […]

Gross Domestic Product (GDP) is essentially an indicator of aggregate economic activity. In addition to that, it is also frequently used to describe social welfare in an economy. The idea behind this is that GDP tends to correlate with consumption, which in turn is commonly used as a proxy for […]

The Gross Domestic Product, also known as GDP, is arguably the most common indicator to describe a country’s economic performance (see also the world’s top 10 countries by GDP). Generally speaking, it measures the total value of all goods and services produced in an economy over a set period of […]

Deflation is often considered a highly unfavorable phenomenon. Although the idea of falling prices may seem appealing (at least from a consumer perspective), deflation is mentioned among the worst things that can happen to an economy. However there are different types of deflation that have different implications. In other words, the […]

The principle of economic growth has become quite controversial in recent years. While many economists perceived the necessity of growth almost as a dogma, critics have become increasingly numerous. Because most economies are overexploiting natural and non-renewable resources, the idea of unlimited economic growth seems to be doomed to fail […]