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Theories and Basics


Articles explaining and demystifying every key term and theory in economics.


A Beginner’s Guide to the Developmental State

economical development

What is the developmental state? The Developmental State is a term coined by Chalmers Johnson that is used to describe states which follow a particular model of economic planning and management. It was initially used to describe post-1945 Japan and its rapid…

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Classical Unemployment Explained

job searching

Quick Definition: Classical unemployment is a type of unemployment caused by real wages being too high in the economy. Too high real wages mean firms cannot afford to employ all available workers so some are left unemployed Also known as: Real-wage unemployment…

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Economic System Explained

Quick Definition: An economic system is the way the government of a country organises the production and consumption of goods and services in the economy. What is an economic system? An economic system is the system the government of a country uses…

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Multiplier Effect Explained

graph of multiplier effect explained

Quick Definition: The multiplier effect is when an increase in government spending has a greater impact on the economy than the initial amount spent. What is the multiplier effect? The multiplier effect is a concept in economics that describes how an injection…

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The Circular Flow of Income Explained

Quick Definition: Circular flow of income is the economic theory that in an economy total expenditure and total income are equal. What is the circular flow of income? The circular flow of income is a theory that describes the movement of expenditure…

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Factors of Production Explained

factors of production summary

Quick Definition: The factors of production are inputs used to create goods and services. The four factors are land, labour, capital and human enterprise. What are the factors of production? The factors of production are the names for the inputs needed to…

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A Beginner’s Guide to the Solow Growth Model

the solow growth model diagram

What is the Solow growth model? The Solow growth model, also called the neoclassical growth model, was developed by Robert Solow and Trevor Swan in 1956. Robert Solow later received the Nobel Prize in Economics in 1987 for his work on this…

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Advantages and Disadvantages of Minimum Wage

What is a minimum wage? Minimum Wage is defined as the minimum amount of compensation that labours must receive under the law. In public economics, it is often treated as a measure to tackle poverty by ensuring all workers can enjoy a…

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