Archives: Terms

Definition of Harrod–Domar Model The Harrod–Domar model is an early economic model formulating the dynamics of economic growth. It focuses particularly on the roles of savings and investment, as well as the importance of the capital-output ratio. According to this model, for an economy to grow, there must be not […]

Definition of the Harris–Todaro Model The Harris–Todaro model is an economic theory that explains the migration of labor from rural to urban areas in developing countries. This model is based on the concept that individuals make migration decisions not solely on the basis of wage differentials between the urban and […]

Definition of the Guns Versus Butter Model The Guns Versus Butter Model is a concept used in economics to illustrate the relationship between a nation’s investment in defense and civilian goods. In this model, “guns” represent military spending, and “butter” symbolizes spending on civilian goods such as education, healthcare, and […]

Glossary of Economics ### Deadweight Loss #### Definition of Deadweight Loss A **Deadweight Loss** refers to the reduction in total surplus (the sum of consumer surplus and producer surplus) due to inefficiencies in the market. These inefficiencies often arise from market distortions such as taxes, subsidies, tariffs, price floors, and […]

Definition of the Grossman Model of Health Demand The Grossman model, introduced by economist Michael Grossman in the 1970s, is a seminal framework in health economics. This model conceptualizes health not only as a fundamental aspect of human well-being but also as a form of capital that individuals invest in […]

Definition of Gross Private Domestic Investment Gross Private Domestic Investment (GPDI) is a key economic indicator that represents the total amount of spending on capital investments by private businesses, households, and non-profit institutions within a country’s borders. This figure includes outlays on physical assets such as machinery, equipment, tools, buildings, […]

Definition of Gross Domestic Product (GDP) Gross Domestic Product (GDP) is a standard measure of the economic health of a country and 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 […]

Definition of Grosch’s Law Grosch’s law, named after computer scientist Herbert Grosch in the mid-20th century, posits that computer performance increases as the square of the cost. In more specific terms, Grosch’s law suggests that the power of a computer (or computer-like devices) grows at a much faster rate than […]

Definition of the Grinold and Kroner Model The Grinold and Kroner Model is a financial model used to estimate the expected return on a stock or equity investment. It breaks down the expected return into several components, allowing investors and analysts to understand what drives the returns of their investments. […]

Definition of Greenwood–Hercowitz–Huffman Preferences Greenwood–Hercowitz–Huffman (GHH) preferences refer to a specific formulation used in macroeconomic models to analyze labor supply decisions and the intertemporal elasticity of substitution in consumption without generating wealth effects on labor supply. This preference structure is named after its developers, Jeremy Greenwood, Zvi Hercowitz, and Gregory […]