by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Balance of Trade as a Balance of Payments? The connection between trade balances and international flows of financial capital is so close that economists sometimes describe the balance of trade as the balance of payments. Each category of the current...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Is it better to have a trade surplus or a trade deficit? Because flows of trade always involve flows of financial payments, flows of international trade are actually the same as flows of international financial capital. The question of whether trade deficits or...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Income Payments? Income payments on assets, as the name implies, is income resulting from ownership of assets – including, interest, dividends, rents, royalties, etc. The third component of the current account balance, labeled “income payments,” refers...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does U.S. unemployment insurance work? Unemployment insurance is a joint federal–state program that the federal government enacted in 1935. While the federal government sets minimum standards for the program, state governments conduct most of the administration....
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Natural Rate of Unemployment? Cyclical unemployment explains why unemployment rises during a recession and falls during an economic expansion, but what explains the remaining level of unemployment even in good economic times? Why is the unemployment rate...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Relative Wage Coordination Argument? The relative wage coordination argument points out that even if most workers were hypothetically willing to see a decline in their own wages in bad economic times as long as everyone else also experiences such a...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Insider-Outsider Model? The insider-outsider model of the labor force, in simple terms, argues that those already working for firms are “insiders,” while new employees, at least for a time, are “outsiders.” A firm depends on its insiders to keep the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Adverse Selection of Wage Cuts Argument? The adverse selection of wage cuts argument points out that if an employer reacts to poor business conditions by reducing wages for all workers, then the best workers, those with the best employment alternatives at...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Efficient Wage Theory? Efficiency wage theory argues that workers’ productivity depends on their pay, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. One reason is that...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Implicit Contract Theory of Wages? One argument is that even employees who are not union members often work under an implicit contract, which is that the employer will try to keep wages from falling when the economy is weak or the business is having...
