Understanding the Economics of Financial Markets

Understanding the Economics of Financial Markets

What is the purpose of financial markets? How does a financial market (such as a market for stocks and bonds) work? Financial markets are markets specifically designed for moving and managing money. This includes stock and bond markets as well as insurance markets. What other markets do for tangible goods, financial markets do for capital—essentially, they direct it to where it can be the most productive, which, in general, is where it’s earning the highest return.  In this article, we’ll explore the economics of financial markets, explain the four basic needs they serve and discuss the common misbelief about financial

What Are Economic Incentives?

What Are Economic Incentives?

What are economic incentives? What are the key forces that drive the behavior of economic agents? Economics is based on the assumption that incentives drive the market. This means the incentives of both individual people and also individual firms, each of which are working to benefit their own particular well-being. In this article, we’ll explore the incentives of both firms and individuals and some ways in which incentives can work poorly, distorting the market instead of allowing it to function properly. 

Economics Explained: How a Capitalist Market Works

Economics Explained: How a Capitalist Market Works

What exactly is a market? How does an economic market regulate itself given there’s no central authority overseeing its inner workings? A market is essentially a collection of billions of separate transactions that form a complex economy in which people can earn and spend money to fund their lives. A capitalist market functions cohesively, not because a centralized authority tells it what to do, but because each transaction works together efficiently. The paradox of the market is that while individuals use the market to increase their own individual well-being, in the process, they increase everyone else’s well-being also. In this

The Economics Behind Exchange Rates—Explained

The Economics Behind Exchange Rates—Explained

What exactly is an exchange rate? How do countries determine their exchange rates? In simple terms, the exchange rate is the price at which you can purchase one currency using another currency. There are several ways that a country can determine the value of its currency and its exchange rate. Learn about the economics of exchange rates, explained in simple terms. We’ll discuss the gold standard way of determining the exchange rates, and the difference between floating and fixed exchange rates.

Beginner Economics: How Do Currencies Work?

Guaranteed Basic Income: Creating A Better Tomorrow

How do currencies work? How do economists determine the value of a country’s currency? A physical piece of currency is just a piece of paper or a coin, but it represents an amount of purchasing power that can be used for goods and services. To evaluate a currency’s purchasing power, economists determine how many goods and services it can purchase from a hypothetical “basket of goods” that includes a broad range of things for sale in any given country.  In this article, we’ll examine currencies and how the international market uses them to function.

How the Health of an Economy Is Measured

How the Health of an Economy Is Measured

What reflects the health of an economy? What markers do economists use to measure the strength of a country’s economy? Sometimes, an economy functions well: It grows at a healthy rate that allows many people to earn a good living. But sometimes, it suffers a period of stagnation or contraction, when people find it harder to survive or to thrive within the market. There are several markers of economic health including GDP (gross domestic product), unemployment rates, Gini coefficient, etc. In this article, we’ll explore how economists measure the health of an economy, what causes an economy to fall into

What Is the Role of Government in an Economy?

What Is the Role of Government in an Economy?

What is the role of government in an economy? Would economies function better if left to their own devices? A government makes a capitalist market possible. Though people, including many politicians, sometimes speculate about how much better the market could operate if there were little or no government around, the truth is, countries without strong governments have almost non-existent markets in which it’s difficult to conduct even simple transactions. In this article, we’ll explore the different ways a government can facilitate a functioning market economy. We’ll also explore the ways it can destroy one: Government intervention in the economy isn’t

College Is a Business: Students Are Just Customers

College Is a Business: Students Are Just Customers

How did colleges start running like businesses rather than educational institutions? What impact has this had on the students? These days, colleges are run more like big businesses than educational institutions. This is because education is so profitable that the administrators started looking at students as customers and valuable assets that need to be catered to or they’ll lose money. Keep reading to learn why college is a business and students are merely customers.

Asymmetric Information in Economics: Explained

Asymmetric Information in Economics: Explained

What do economists mean when they talk about “asymmetric information”? What role does the asymmetricity of information about products/services play in the functioning of an economy? In economics, asymmetric information refers to the situation where one party has more information about the product/service than the other. Information, and who has access to it, have an outsized influence on how smoothly an economy runs. A free flow of information allows for easy and smart transactions. In this article, we’ll explain asymmetric information and discuss its implications for individuals, firms, and economic policy.

The Role of Human Capital in Economic Development

The Role of Human Capital in Economic Development

What exactly is human capital? What is the role of human capital in economic development? Human capital is the sum of what makes an individual valuable and marketable (e.g. intelligence, athletic ability, education, and work experience, etc). Economies with higher levels of human capital are stronger than those with lower levels for a number of reasons: 1) it increases wealth; 2) it controls population growth, 3) it drives productivity, and 4) it explains inequality. We’ll explore each of these below.