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Supply and Demand: The fundamental principle of economics, stating that the price and quantity of goods and services are determined by the interaction of supply (the quantity producers are willing to provide) and demand (the quantity consumers are willing to purchase).
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Market Economy: An economic system where the production, distribution, and prices of goods and services are determined by the interactions of buyers and sellers in free markets, with limited government intervention.
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Inflation: The rate at which the general level of prices for goods and services rises, eroding the purchasing power of currency. It is usually measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI).
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Fiscal Policy: The use of government spending and taxation to influence the economy. Expansionary fiscal policy involves increasing government spending and/or reducing taxes to stimulate economic growth, while contractionary fiscal policy involves decreasing spending and/or increasing taxes to cool down an overheating economy.
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Monetary Policy: Actions taken by a central bank, such as adjusting interest rates and controlling the money supply, to influence the availability and cost of credit in the economy, thereby affecting economic growth, inflation, and employment.
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Gross Domestic Product (GDP): The total value of all goods and services produced within a country's borders in a given period. GDP is a key indicator of economic health and is often used to compare the economic performance of different countries.
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Unemployment Rate: The percentage of the labor force that is without a job and actively seeking employment. It is an important indicator of the overall health of an economy.
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International Trade: The exchange of goods, services, and capital between countries. International trade allows countries to specialize in producing goods and services in which they have a comparative advantage, leading to increased efficiency and economic growth.
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Market Failures: Situations where the free market fails to allocate resources efficiently. Market failures can occur due to externalities (costs or benefits imposed on third parties), public goods (non-excludable and non-rivalrous goods), or imperfect competition.
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Economic Growth: The increase in the production of goods and services over time, often measured by the growth rate of real GDP. Economic growth is essential for improving living standards and reducing poverty.
These concepts provide a foundation for understanding various aspects of the economy and how it functions.
