What is Currency? Currency refers to money, that which is used as a medium of exchange for goods and services in an economy. Before the concept of currency was introduced, goods and services were exchanged for other goods and services under the barter system. Bartering made it quite difficult to accurately determine the value of…
What is the Law of One Price (LOOP)? The Law of One Price (sometimes referred to as LOOP) is an economic theory that states that the price of identical goods in different markets must be the same after taking the currency exchange into consideration (i.e., if the prices are expressed in the same currency). The…
What is Capital Flight? In economics, capital flight is a phenomenon characterized by large outflows of assets and/or capital from a country due to some events, resulting in negative economic consequences to that country. Additionally, the term can be referred to as the rapid withdrawal of assets and capital from certain regions or cities within…
What is a Free Market? A free market is a type of economic system that is controlled by the market forces of supply and demand, as opposed to one regulated by government controls. It is opposite on the spectrum to a command economy, where a central government agency plans the factors of production and use…
What is Market Power? Market power is a measure of the ability of a company to successfully influence the pricing of its products or services in the overall marketplace. Factors influencing Market Power 1. Number of competitors in a market For a company to hold extensive market power in the industry in which it operates,…
What is an Industry? An industry – or sector – is the whole of all economic activities by companies, people, and organizations involved in the production of goods and services for a particular field. Industries are usually categorized by the goods and services they produce. For example, the pizza industry is made up of all…
What are the Different Types of Interest? The three types of interest include simple (regular) interest, accrued interest, and compounding interest. When money is borrowed, usually through the means of a loan, the borrower is required to pay the interest agreed upon by the two parties. Simple (Regular) Interest Simple or regular interest is the…
What is Socialism? Socialism is a system in which every person in the community has an equal share of the various elements of production, distribution, and exchange of resources. Such a form of ownership is granted through a democratic system of governance. Socialism has also been demonstrated through a cooperative system in which each member…
What is the Government? The government is very influential in all aspects of the financial world. Government regulations and policies affect the overall economy and directly impact the operations of financial institutions. Government laws and regulations, in fact, affect the financial affairs of every business and every individual. Governments regulate and influence finances of every…
