Money

Why do governments intervene in markets? Is government intervention good for an economy? When there is a market failure of some sort, governments often intervene to restore the economic system. However, if the government sets too many rules, or gets too involved in managing economic operations, it can destroy an economy. In this article, we’ll discuss three possible downsides of government intervention: 1) misallocation of resources, 2) rising costs due to regulations, 3) stifled growth, and 4) distorted incentives due to taxes.

Can you get rich quick from stocks? How do investors determine which stocks are going to pay off big? The stock market has a reputation for allowing people to “get rich quick” by betting big on a stock that pays unexpectedly large returns. Unfortunately, this reputation is misleading. Although it certainly can happen occasionally—just as gambling in Las Vegas can occasionally make a person wealthy—the unremarkable truth is that get-rich-quick schemes usually fail because they hit two realities: 1) all information is public, and 2) people don’t typically undervalue their own stocks. Here is why getting rich quick off stocks

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 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

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.

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.