A Student of Economics

Documenting the things I learn.

[economr]

Fiscal and Monetary Policy

Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply.

[economr]

Indifference Curve and Production Possibility Frontier (PPF)

The PPF limits the set of plausible indifference curves. Although the most outward indifference curve yields the highest utility, due to the PPF limiting the production, the best decision for the consumer is to select the combination of goods where the slope of the indifference curve = the slope of the PPF (highest utility possible).

[economr]

Bubble

1. An economic cycle characterized by rapid expansion followed by a contraction. 2. A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive selloff occurs. 3. A theory that security prices rise above their true value and will continue to do so until prices go into freefall and the bubble bursts.

[economr]

Speculation

The act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay, in expectation of a substantial gain. With speculation, the risk of loss is more than offset by the possibility of a huge gain; otherwise, there would be very little motivation to speculate. While it is often confused with gambling, the key difference is that speculation is generally tantamount to taking a calculated risk and is not dependent on pure chance, whereas gambling depends on totally random outcomes or chance.

[economr]

Economics is an interactive epistemology.

[economr]

Article of faith

If a NATO member comes under attack

[economr]

Finance was once regarded as a vocational subject.

[economr]

Productivity and Unemployment

Increased productivity has a pretty complicated relationship with unemployment. Depending on circumstances it can either help produce new jobs or eliminate a large swath of existing jobs. These changes often occur in cycles that occur time and time again as markets adjust and readjust to the realities of the modern world.

[economr]

Supply Shock

A supply shock is an event that suddenly increases or decreases the supply of a commodity or service, or of commodities and services in general. This sudden change affects the equilibrium price of the good or service or the economy's general price level.