Economics

[vsw id=”opwhOwJygDA” source=”youtube” width=”611″ height=”344″ autoplay=”no”] The monetary transmission mechanism is the process where general economic conditions and asset prices are affected due to the monetary policy decisions. It occurs through interest rate channels that influence the costs of borrowings,…

Expected Inflation Expected inflation is the inflation that economic agents anticipate in the future. Expected inflation leads to “menu cost,” which refers to a scenario in which businesses change their advertised prices constantly. The constant fluctuation of prices is due…

Objectives of Central Banks The main objective of a central bank is to ensure financial stability. Depending on the country, central banks might have other objectives such as controlling inflation, unemployment, interest rates, or exchange rates. However, all these objectives…

The Fisher effect was developed by an economist named Irvin Fisher. This effect is directly connected to the neutrality of money. It states that the real interest rate is stable in an economy and that changes in nominal interest rates…

Supply of Money Like any other market, demand and supply of money will interact to produce an equilibrium price of money. The graph below shows the supply and demand for money. The money supply (MS – M/P) is vertical since…

[vsw id=”opwhOwJygDA” source=”youtube” width=”611″ height=”344″ autoplay=”no”] The money creation process is very helpful in understanding the role of money in the economy. The strength of money creation is influenced by the amount kept in the bank as a reserve for…

Definitions of Money According to Growther, money refers to anything that is generally accepted as a means of exchange. What’s more, it is that which at the same time acts as a measure and store of value. John Maynard Keynes…

Monetary policy and fiscal policy refer to government policies and tools used to control macroeconomic variables and financial markets. Whenever economic activities start to slow down, these tools are used to accelerate growth. Similarly, when the economy starts to overheat,…