What Is an Output Gap?

The output gap is the difference between an economy’s potential output and its actual output. Potential output is the maximum amount of goods and services an economy can produce when all of its resources are being used efficiently. Actual output is the amount of goods and services the economy is actually producing. The output gap … Read more

What Is Price Efficiency?

Price efficiency is the efficient allocation of resources in an economy. In an efficient economy, resources are allocated in a way that maximizes economic welfare. The concept of price efficiency is often used in the context of perfect competition, where it is assumed that all firms are price takers and that there is perfect information. … Read more

Reference Base Period.

The Reference Base Period is the time period used for comparison when measuring economic growth. It is used to calculate real GDP growth rates. The most common reference base period is the previous quarter. What is the reference base period for CPI? The reference base period for CPI is the year 1982-1984. What does PPI … Read more

The Meaning of Recession in Economics and Its Causes.

What is a recession? A recession is a period of temporary economic decline during which trade and industrial activity are reduced, usually identified by a fall in GDP (Gross Domestic Product) growth, an increase in unemployment, and a decline in the stock market. What is an example of recession? A recession is a period of … Read more

Capital Consumption Allowance (CCA) Definition.

The Capital Consumption Allowance, or CCA, is a deduction businesses can take against their income for the wear and tear on their capital equipment and buildings. The CCA is also sometimes called the ” depreciation deduction.” The CCA is important because it allows businesses to deduct the costs of maintaining their capital equipment and buildings, … Read more

Infant-Industry Theory Definition.

The infant-industry theory is the idea that it is sometimes necessary for a government to protect young, developing industries from foreign competition through the use of tariffs or other trade barriers. The theory is based on the premise that these fledgling firms are not yet able to compete against established foreign firms and need time … Read more

Input-Output Analysis: What it is, What it Does, and Its Types.

Input-Output Analysis: Definition, Key Features, and Types What is input and output examples? In macroeconomics, the term “input” refers to the resources used to produce goods and services. These resources can be either physical (e.g. land, labor, capital) or human (e.g. knowledge, skills, entrepreneurship). Output, on the other hand, refers to the quantity of goods … Read more

What the Wholesale Price Index (WPI) Measures.

The Wholesale Price Index (WPI) measures the prices of goods and services traded between businesses, also known as the “wholesale” price. The WPI is a basket of goods and services that businesses buy and sell to each other, rather than to consumers. The WPI is used to measure inflation in the economy. The WPI is … Read more

Absolute Advantage: Definition, Benefits, and Example.

Absolute Advantage: Definition and Benefits How do you do absolute advantage? In order to calculate absolute advantage, you will need to compare the output per unit of input for two different countries. The country with the higher output per unit of input is said to have an absolute advantage in the production of that good … Read more