www.com .Economic Growth y Economic growth is the increase in the value of goods and services produced by an economy. It is conventionally measured as the percent rate of increase in real gross domestic product. or GDP.a2zmba.

a2zmba.Investment Š Investment or investing is a term with several closely- related meanings in finance and economics.com . It refers to the accumulation of some kind of asset in hopes of getting a future return from it. Š given by the relation I = (Y. i). whereas a higher interest rate will discourage investment as it becomes costlier to borrow money. Š In theoretical economics. An increase in income will encourage higher investment. Examples include building a railroad. www. or a factory. investment means the purchase (and thus the production) of capital goods goods which are not consumed but instead used in future production.

y Types of investments include equity investment or real estate investment. investment means buying securities or other monetary or paper assets.y In finance.a2zmba. foreign currencies or bonds or postage stamps.com . www. These investments may then provide future cash flows and may increase or decrease in value.

www.a2zmba.Aggregate Supply y Aggregate Supply is the total supply of goods and services by a national economy during a specific time period.com .

a2zmba. It is often called effective demand or it is the demand for the gross domestic product of a country.Aggregate Demand y Aggregate Demand is the total demand for goods and services in the economy during a specific time period. www.com .

a2zmba. relative to their prices at some fixed date in the past. www.Aggregate price y Aggregate Price level is a measure of the average level of prices of goods and services in the economy.com .

observed an inverse relationship between money wage changes and unemployment in the British economy over the period examined.a2zmba. Š The Phillips Curve Shows the trade-off between higher inflation and lower rate of unemployment.com .Unemployment and general Price level. in his 1958 paper "The relationship between unemployment and the rate of change of money wages in the UK 1861-1957" published in Economica. Š The British economist A W Phillips. www.

com .a2zmba.www.

www.com . such as rational expectations and the NAIRU (non-accelerating inflation rate of unemployment) arose to explain how stagflation could occur. so there was no trade-off between inflation and unemployment.a2zmba. only a single rate of unemployment (the NAIRU or "natural" rate) was consistent with a stable inflation rate.y New theories. The latter theory also known as the theory of the natural rate of unemployment distinguished between the short-term Phillips curve and the long-term one. The long-run PC was thus vertical. In the long run. The short-term PC looked like a normal PC but shifted in the long run as expectations changed.

Š For example. it equals zero. the theory of rational expectations says that the expected price (Pe) would equal:  Pe = P* + e where e is the random error term. www. e is also independent of P*. On average.Rational Expectations Š Rational expectations is a theory. determined by supply and demand. Then. It was originally proposed by John F Muth (1961).com .a2zmba. used to model the determination of expectations of future events by economic actors. suppose that P* is the equilibrium price in a simple market.

Stagflation y When countries experience high levels of both inflation and unemployment then this can be called as Stagflation.com . www.a2zmba.

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