The New Keynesian Business Cycle Theory is a modern economic framework that explains business cycles, or fluctuations in economic activity, using Keynesian principles combined with microeconomic foundations. It builds on the traditional Keynesian approach by incorporating price and wage stickiness, imperfect competition, and rational expectations. This theory seeks to answer why recessions and booms occur, …
The United States is widely recognized as a postindustrial economy, meaning that its economic structure has shifted from one based on manufacturing and industry to one dominated by services, technology, and knowledge-based sectors. This transition reflects broader global economic changes and the increasing role of innovation, digitalization, and finance in shaping economic growth. In this …
In economics, underemployment equilibrium refers to a situation where an economy is operating below its full employment level, with unused labor and production capacity persisting over time. This concept is central to Keynesian economics, which argues that economies can settle into a state of equilibrium with high unemployment due to insufficient aggregate demand. John Maynard …
The relationship between foreign aid and economic growth has been a topic of intense debate for decades. While some argue that aid fosters development, others claim it creates dependency and slows progress. One of the key challenges in this debate is the simultaneity problem, which makes it difficult to determine whether aid drives growth or …
Reaganomics refers to the economic policies implemented by President Ronald Reagan during his administration (1981-1989). These policies aimed to reduce government intervention in the economy, promote free-market growth, and curb inflation. Reagan’s approach was heavily influenced by supply-side economics, which emphasizes lowering taxes and reducing regulation to stimulate production and investment. This topic explores the …
Gunnar Myrdal, a Swedish economist, developed the Theory of Backwash Effect to explain how economic development in one region can negatively impact surrounding areas. This concept is crucial in understanding regional economic disparities, particularly in developing nations. The theory suggests that growth in a prosperous region often leads to resource drain, migration, and economic decline …
Supply is a fundamental concept in business and taxation. The phrase "supply in the course of furtherance of business" refers to the provision of goods or services as part of a company’s regular operations. This concept is particularly important in the context of taxation laws, such as Value Added Tax (VAT) and Goods and Services …
Commercialism has become a defining feature of modern society, influencing economies, cultures, and individual lifestyles. The rise of commercialism is driven by several factors, including technological advancements, globalization, mass media, and evolving consumer behavior. As businesses seek to maximize profits, commercial strategies increasingly shape markets and influence purchasing decisions. This topic explores the key reasons …
Microeconomics is a branch of economics that focuses on the behavior of individual consumers, businesses, and markets. It examines how supply and demand, pricing, production decisions, and consumer choices influence the economy on a smaller scale. Unlike macroeconomics, which deals with national and global economic trends, microeconomics zooms in on specific markets and economic agents. …
The production possibility curve (PPC) is a fundamental concept in economics that illustrates the trade-offs between two goods or services that an economy can produce given limited resources. The slope of the PPC represents opportunity cost, a crucial economic principle that helps explain efficiency, scarcity, and decision-making. This topic explores the meaning of the PPC …
The attribution of profits to permanent establishments (PEs) is a key issue in international taxation. The Organisation for Economic Co-operation and Development (OECD) provides guidelines to ensure that multinational enterprises (MNEs) allocate profits fairly and in accordance with economic activity. These guidelines aim to prevent profit shifting and ensure that taxation is aligned with where …
Countries around the world are classified into different economic categories based on their level of development. The most common classification distinguishes between developed countries and underdeveloped countries (also referred to as developing nations). These differences are based on various factors such as economic growth, infrastructure, healthcare, education, and quality of life. This topic explores the …
Keynesian economics is one of the most influential economic theories, emphasizing the importance of government intervention in stabilizing the economy. Developed by John Maynard Keynes during the Great Depression, this theory argues that free markets alone cannot ensure full employment and economic stability. Instead, the government plays a crucial role in regulating demand, controlling inflation, …