by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Standardized Employment Budget?The standardized employment budget is the budget deficit or excess for any given period modified to reflect what the business would generate if it were functioning at potential GDP.Every year, the Congressional Budget Office...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the National Debt?Another useful way to view the budget deficit is through the prism of accumulated debt rather than annual deficits. The national debt refers to the total amount that the government has borrowed over time. In contrast, the budget deficit...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Contractionary Fiscal Policy?Fiscal policy can also contribute to pushing aggregate demand beyond potential GDP in a way that leads to inflation.The graph below shows, a very large budget deficit pushes up aggregate demand, so that the intersection of...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Automatic Stabilizers?Changes in tax and spending levels can also occur automatically, due to automatic stabilizers, such as unemployment insurance and food stamps, which are programs that are already laws that stimulate aggregate demand in a recession and...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Discretionary Fiscal Policy? Discretionary fiscal policy concerns government taxation and spending that is not tied to mandatory payments or entitlements and is done to affect aggregate demand in the economy. Keynesian economists believe that government...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is an Aggregate Production Function?The aggregate production function is the maximum output that can be produced given the quantities of the factors of production.Note that, in what follows, lower case letters refer to plant level variables while the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Compound Growth Rate?The components of economic growth include: Physical Capital Human Capital Technology Physical CapitalThe category of physical capital includes the plant and equipment that firms use as well as things like roads (also called...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Solow Growth Model?he Solow Growth Model is a model used to measure economic growth. It analyzes changes in the level of output in an economy over time as a result of changes in the population growth rate, the savings rate, and the rate of technological...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Infrastructure?Infrastructure consists of the physical facilities and public works employed to allow for the development of systems. In economics, infrastructure usually consists of roadways, trains, buildings, etc. Related Topics Rule of Law relate to...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Capital Deepening?When society increases the level of capital per person, we call the result capital deepening. The idea of capital deepening can apply both to additional human capital per worker and to additional physical capital per worker.Recall that one...
