What exactly is GDP? How is inflation measured? Is it always a good thing when stocks go up? Ian McMaster explains important economic concepts in the series “Economics for Amateurs”. Discover the meaning behind the specialist terms.
In the first of our new weekly series: Economics for
Amateurs (EFA), in which we explain important economic concepts, we ask a simple question: is it good or bad when stocks go up? And the answer is — get
used to this one — it depends.
Supply and demand are important concepts in economics
and are seen as the key to determining prices. But what happens when
supply can respond only slowly to changes in demand? For example, in
the case of pigs — or engineers.
If the government increases its spending, how much will output and
employment increase? Arguments about the size of the "multiplier" are
central to discussions of the effectiveness of stimulus packages.
Costs are something that we usually try to avoid or to keep as low as possible. But what exactly are our costs? That might seem like a silly question, but economists have a particular concept of cost, known as the opportunity cost.
Imagine you have a product that is not selling as well as it did in the past (this shouldn't be hard at the moment). You think about changing the price. But should it go up or down? Your price elasticity can help you.
Personally, we all like appreciation. But another form of appreciation plays a key role in the world of economics. So does depreciation, the subject of the sixth item in our Economics for Amateurs (EFA) series.
Oil gets cheaper, cars get cheaper, food gets cheaper, beer gets
cheaper... This sounds like paradise. Yet, many experts are worried about falling prices or "deflation". Economics for Amateurs (EFA), part seven.
One can hardly pick up a newspaper without reading about a fall in the gross domestic product (GDP) of some country or other. But what exactly is GDP? This is the subject of the eighth item in our Economics for Amateurs (EFA) series.
The subject of the ninth item in our Economics for Amateurs (EFA) series is the accelerator. The acceleration principle shows how investment in capital assets is related to the growth of production, not its level.
There has been much talk in recent years about America's balance of payments deficit. But what exactly is the balance of payments? This is
the subject of the tenth item in our Economics for Amateurs (EFA) series.