Definition of Quantity Demanded Quantity demanded is the amount of a good or service that consumers are willing and able to purchase at a given price. That means it is the number of units of a good or service that consumers are willing to buy at different price levels. It […]
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Quantity Equation
Definition of Quantity Equation The quantity equation is an economic equation that describes the relationship between the money supply, the price level, and the real output of an economy. It states that the money supply (M) multiplied by the velocity of money circulation (V) is equal to the price level […]
Read moreQuantity Supplied
Definition of Quantity Supplied Quantity supplied is the amount of a good or service that a producer is willing and able to supply at a given price. That means it is the number of units of a product or service that a producer is willing to sell at different price […]
Read moreQuantity Theory Of Money
Definition of Quantity Theory of Money The quantity theory of money (QTM) is an economic theory that states that the general price level of goods and services is directly proportional to the amount of money in circulation. That means if the money supply increases, the prices of goods and services […]
Read moreRandom Walk
Definition of Random Walk A random walk is a mathematical model of a process in which successive steps or movements are determined by chance. That means it describes a path that consists of a sequence of random steps in which the direction and length of each step are determined by […]
Read moreRational Expectations
Definition of Rational Expectations Rational expectations is an economic theory that states that people’s expectations about the future are based on their past experiences and all the available information they have. That means people form their predictions about the future by using the best available information and their own knowledge […]
Read moreNormal Profit
Definition of Normal Profit Normal profit is the minimum amount of profit that a business must make in order to stay in business, considering both explicit and implicit costs. That means it is the minimum overall return that a business needs to cover its costs and stay afloat (i.e., keep […]
Read moreFederal Funds Rate
Definition of Federal Funds Rate The federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. It is set by the Federal Reserve, or more specifically, the Federal Open Market Committee (FOMC). It […]
Read moreOpportunity Cost
Definition of Opportunity Cost Opportunity cost is defined as the cost of an alternative that must be forgone in order to pursue a certain action. That means it is the potential benefit of the next best alternative that we miss out on when we don’t choose it. Or in other […]
Read moreOptimum Currency Area
Definition of Optimum Currency Area An Optimum Currency Area (OCA) is an area in which it is beneficial for a group of countries to adopt a single currency. That means it describes a region in which the benefits of a common currency outweigh the costs. In other words, it is […]
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