Risk is one of the most important concepts in investing, economics, and personal finance. Our appetite for, or aversion to, risk is the biggest driver behind spend and save decisions. Despite this, very few people really understand just how big a role risk plays in our everyday lives. Risk Definition “Risk” is the probability for Read More…
Property rights is the foundation of all free-enterprise economic systems. It is what allows people to profit from capital and ideas, without fear of seizure by the government or theft. Definition “Property Rights” usually refers to a set of fundamental rights giving citizens control over their own land, capital, and ideas. Land Property Rights The Read More…
International Trade is the system under which businesses, individuals, and governments trade goods and services. This exchange from many different National economies is what makes up the Global economy. Imports and Exports When we talk about international trade, we usually think in terms of imports (the goods and services a country buys from outside) and Read More…
Inflation: how much less a dollar is worth next year compared to today. Most consumers hate inflation – it erodes your savings, and eats away at the real benefits you get from increasing income. However, inflation plays a necessary role in the economy, and without it much of the economy would quickly fall apart. Inflation Read More…
Government spending makes up a whopping 20% of all spending in the American economy, including the salaries of all government employees, government contracts to private companies, and military spending. This is all paid for by taxes, meaning more than 1/3 of all economic activity filters through the public sector in some way. This means government Read More…
The “Time Value of Money” is one of the most important concepts in economics, investing, and business. For individuals, this determines how much you save and spend. For businesses, it determines how quickly they try to expand. For investors, it decides the mix of a portfolio. What is the Time Value of Money? “Time is Read More…
What is “Labor”? “Labor” is how much a person works. It is the use of time an exertion of effort to produce something of value. Generally speaking, the more valuable a person’s labor is, the higher their wage. Skilled And Unskilled Labor Each person starts off as an Unskilled Worker, meaning they do not have Read More…
“Unemployment” is a major economic indicator measuring how much of the working population is currently looking for a job. The unemployment rate is the most “tangible” economic indicator – if GDP is going up or down, it is harder for people to notice in their day-to-day lives. When the unemployment rate goes up, it usually Read More…
Definition “Price Controls” are artificial limits that are put on prices. If the limit is put in place to prevent prices from getting too high, they are called Ceilings. If they are in place to prevent the price from getting too low, they are called “Floors”. Price Ceilings Price Ceilings are controls put in place Read More…
What Are Interest Rates? Interest rates are growth rates – it is a percentage that is used to calculate how much a loan or investment grows over time. Interest rates are most commonly associated with borrowing money, like a homeowner taking out a mortgage or a government selling a bond. The interest rate is how Read More…