Foundations of Economics: The Law of Scarcity
Discuss Economics - Macroeconomics
by discusseconomics
1y ago
Foundations of Economics: The Law of Scarcity Most of the basic laws of economics focus on ways to efficiently build wealth and prosperity over time.  But there are important financial concepts that turn this problem in the other direction, instead choosing to focus on the effects that a lack of available resources can have on the economy as a whole.  The Law of Scarcity is one of these foundational ideas – and its implications can have a drastic impact on the ways a society produces its goods and services. Concept of Scarcity In finance, the term scarcity refers to the idea that an ..read more
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Foundations of Economics: The Law of Scarcity
Discuss Economics - Macroeconomics
by discusseconomics
2y ago
Foundations of Economics: The Law of Scarcity Most of the basic laws of economics focus on ways to efficiently build wealth and prosperity over time.  But there are important financial concepts that turn this problem in the other direction, instead choosing to focus on the effects that a lack of available resources can have on the economy as a whole.  The Law of Scarcity is one of these foundational ideas – and its implications can have a drastic impact on the ways a society produces its goods and services. Concept of Scarcity In finance, the term scarcity refers to the idea that an ..read more
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Introduction to Macroeconomics – Some key terms
Discuss Economics - Macroeconomics
by discusseconomics
2y ago
Economics: The Study of how society deals with scarcity. Here is a brief article on the introductory components of any economy with a macroeconomic slant. In the economy we expect to find these four components: resource endowment, technology, preference, institutions. Some key terms that you should be aware of include: Scarcity: Resources are limited in any environment relative to the needs and desires of the people who control them. Opportunity cost: value of most highly valued foregone alternative; every benefit has a cost. Another way to look at it is trade offs –> hence in this system p ..read more
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Fed Policy: Why Do Rates Hikes Hurt Stock Markets?
Discuss Economics - Macroeconomics
by discusseconomics
5y ago
Fed Policy: Why Do Rates Hikes Hurt Stock Markets? On December 18th, the Federal Reserve announced a rate hike of 25 basis points. For the U.S. economy, this is the fourth increase of 2018 and it brings the Fed funds rate to a range of 2.25% to 2.5%.  The move came despite strong opposition from U.S. President Donald Trump, and equities prices fell quickly in response to the decision. As a clear indication that investors are also unhappy with the move, stock markets are now set to close the 2018 in negative territory for the first time since 2009.  So, what exactly is the reason stocks tend ..read more
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Financial Markets: What Is The Price To Earnings Ratio?
Discuss Economics - Macroeconomics
by discusseconomics
5y ago
Financial Markets: What Is The Price To Earnings Ratio? For those without experience, the stock market can seem like a complicated entity.  But the reality is that most of the strategic conclusions that are drawn by hedge funds and other large investors can be boiled down to relatively simple math equations. One example is the price-to-earnings ratio, or P/E ratio.  This financial metric is often used to assess a stock’s market price level in relation to its ability to generate corporate earnings over a specified period of time.  The P/E ratio can be useful in determining whether a stock is “c ..read more
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Relation between Inflation and Interest Rates (graph)
Discuss Economics - Macroeconomics
by discusseconomics
5y ago
A number of people and students wonder about the relationship between inflation rate movements and the quarterly interest rate (nominal and real interest rate). Here are observations based on Canadian data over a 50 years period that tracks T-Bill interest rate, consumer price index, and real interest rate. This graph illustrates a number of movements. Firstly, inflation rate and the real interest rate appear to move in opposite directions at all time. Secondly, generally in the long-run the nominal interest rate appears to lag behind the movements of the inflation rate, however, moves dir ..read more
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Introduction to Macroeconomics – Some key terms
Discuss Economics - Macroeconomics
by discusseconomics
5y ago
Economics: The Study of how society deals with scarcity. Here is a brief article on the introductory components of any economy with a macroeconomic slant. In the economy we expect to find these four components: resource endowment, technology, preference, institutions. Some key terms that you should be aware of include: Scarcity: Resources are limited in any environment relative to the needs and desires of the people who control them. Opportunity cost: value of most highly valued foregone alternative; every benefit has a cost. Another way to look at it is trade offs –> hence in this system ..read more
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National Income Accounting in an Open Economy
Discuss Economics - Macroeconomics
by discusseconomics
5y ago
This article continues on from a previous entry in our macroeconomic blog category called Balance of Payments explained. This article provides an example of the national income accounting scheme in action within an open economy. Comments are always welcome. Remember the income identity: Y = C + I + G + CA Well in an open economy aggregate savings = Y – C – G = I + CA, OR, I = S-CA To finance investment you can either go to the current account or savings (or borrow from the world). I (investment) is domestic investment financed by savings and foreign savings. Some examples: Case 1 (Closed e ..read more
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Bank of Canada Keeps Overnight Interest Rate at .5% for 3rd Quarter
Discuss Economics - Macroeconomics
by discusseconomics
5y ago
The Bank of Canada announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is 3/4 per cent and the deposit rate is 1/4 per cent. Although inflation is heading back to a 2% target by next year, the global economy continues to show signs of weakness. Although the economy South of the border has picked up, they are currently in an election and economic uncertainty coupled with no major policy shifts for the rest of the year, means no significant economic changes on the horizon. The energy sector, coupled with significant fires in Alberta’s oil sands capit ..read more
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National Income Accounting Explained
Discuss Economics - Macroeconomics
by discusseconomics
5y ago
Including Intro to Balance of Payments Here is a brief tutorial to aid newbie economists understand the constructs behind national income accounting and balance of payments (the two are related). To do so we’ll introduce the two measures of national income which most of you are familiar with: GDP (gross domestic product) and GNP (gross national product). Gross Domestic Product (GDP): the total value of all FINAL goods and services produced in an economy (country) domestically in a given time period. Gross National Product (GNP): the total value of all FINAL goods and services (G&S) produce ..read more
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