Swan diagram
Encyclopedia
In economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, a Swan diagram, also known as the Australian model (because it was originally used by Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...

n economists to model the Australian economy during the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...

), represents the situation of a country with a currency peg. The concept was developed by Trevor Swan
Trevor Swan
Trevor Winchester Swan was an Australian economist. He is best known for his work on the neoclassical model of economic growth, published simultaneously with that of Robert Solow, for his work on integrating internal and external balance, represented by the Swan diagram and for pioneering work in...

 in 1955.

Two lines represent a country's respective internal (employment
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

 vs. unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...

) and external (current account deficit vs. current account surplus) balance with the axes representing relative domestic costs and the country's fiscal deficit. The diagram is used to evaluate the changes to the economy that result from policies that either affect domestic expenditure or the relative demand
Demand (economics)
In economics, demand is the desire to own anything, the ability to pay for it, and the willingness to pay . The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time....

for foreign and domestic goods.
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