The Financial System

The Securities and Exchange Commission (SEC) in the United States financial system is a regulatory body that monitors the financial system, exchange, and securities market. Securities are types of financial instruments created in financial markets.The Five Parts to the Financial System1. Money Money is used as a medium to buy goods…
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The Pigou Effect

The Pigou effect is an economics term that refers to the stimulation of output and employment. Increasing consumption causes this because of a rise in real balances of wealth, particularly during deflation.Arthur Cecil Pigou defined real wealth as the sum of the money supply and government bonds divided by the price level. He argued that…
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Inflation

Inflation is the sustained increase of the price level. The rate of inflation is the change in general price levels over a period. When the price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in purchasing power per unit of money. The opposite of inflation is deflation.Measuring…
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Purchasing Power Parity

Purchasing Power Parity (PPP) is a theory that says that in the long run (over several decades), the exchange rates between countries should even out so that goods essentially cost the same in both countries. The Purchasing Power Parity theory explains that there should be no arbitrage opportunities (where price differences in countries can…
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Economics of Buying vs Renting a Textbook

As a college student, textbooks form one of the largest percentages of expenses (excluding tuition and housing). When does it make sense to buy and when does it make sense to rent? Let's examine the economics of buying vs. renting a textbook by first analyzing the unique problem in the textbooks market, touching upon the failure of ebooks and…
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Perfect Competition Rise in Demand

Perfect Competition or Pure Competition (PC) is a type of market structure, which doesn’t exist and is considered to be theoretical. There are very many small firms that produce an identical product. They sell whatever they can produce, and no single firm affects the market price.In the long run, with the entry of new firms in the industry, the…
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