What is money? In Economics, money is defined as anything that is generally accepted as payment for goods or services or in the payment of debts. This definition immediately highlights the fact that even though when we think of what money is, we usually tend to refer to currency (paper bills and coins), it is … Continue reading The Functions of Money
Financial intermediaries are the actors that characterize indirect finance, a way to move funds from lenders to borrowers characterized by the involvement of a third party, the financial intermediary. It stands between the savers and spenders and, by borrowing funds from the former and then using these funds to make loans to the latter helps … Continue reading Financial Intermediaries
Moral hazard is defined as the risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, credit capacity, or liabilities. Moral hazard is a problem that appears in financial markets as a consequence of the presence of asymmetric information, which is when one party … Continue reading Moral Hazard in Financial Markets
In Economics, adverse selection is defined as a market situation where buyers and sellers have different information, so that a participant might participate selectively in trades which benefit them the most, at the expense of the other trader Adverse selection is a problem that appears in financial markets as a consequence of the presence of asymmetric information, which … Continue reading Adverse Selection in Financial Markets
The Gross domestic product (GDP) is a monetary measure that represents the market value of all the finished goods and services produced in a specific time period, normally a year, within the geographic boundaries of a country. It is the number that is looked at when talking about the “size” of an economy. As stated … Continue reading What is the Gross Domestic Product (GDP)?
Introduction The Financial Markets allow people, companies, and other organizations, to transfer funds from those who have an excess of available funds to those who have a shortage. They are a crucial component to ensure that the economy of a country is solid and they are also often one of the key factors to ensure … Continue reading The Financial Markets
In economics, the price elasticity of demand (PED) is defined as the degree to which the desire for something changes as its price rises. In other words, it measures the relationship between a change in the quantity demanded of a good or service and the change in its price. The term elasticity is used to … Continue reading What is the Price Elasticity of Demand?
The “Monetary Transmission Mechanism” is the set of operations by which monetary policy decisions affect the aggregate demand, the credit market, interest rates and the economy in general. This mechanism operates through different transmission channels which are grouped into three main categories, depending on the area they affect the most. These are interest rate channels, … Continue reading The Monetary Transmission Mechanism
In Economics, the multiplier effect is defined as the change in income to the permanent change in the flow of expenditure that caused it. What this means is that the multiplier effect, as its name indicates, refers to the proportional amount of increase (or decrease) in final income that results from an injection (cut) of … Continue reading What is the Multiplier Effect?
In economics, hyperinflation is defined as extreme economic inflation with prices rising at a very high rate in a very short time. In order to understand what hyperinflation is, it is important to have clear in mind what inflation is. Inflation is a sustained increase in the general price level of goods and services in … Continue reading What is Hyperinflation?