Rational Expectations
What are Rational Expectations? Rational expectations is an economic theory that states that individuals make decisions based on the best available information in the market and learn from past trends. Rational expectations suggest that people will be wrong sometimes, but that, on average, they will be correct. Understanding the Concept of Rational Expectations The idea...
Currency
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...
Law of One Price (LOOP)
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...
Free Market
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...
Socialism
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...
