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It is not possible to establish the conditions of the economy by just inspecting the data as a whole, according to many economists. What is required, instead, is to break the data into its key components, which supposedly will enable economists to identify the true state of the economy. Components That Drive the Data According to popular thinking,

The Nobel Prize in economics for 2022 was awarded to Ben S. Bernanke, Douglas W. Diamond and Philip H. Dybvig for their research on the role of banks in economic growth and on how banks can set in motion a severe economic crisis. In this article, we focus on the work of Ben Bernanke while making brief comments on the work of the other laureates.

Following in the footsteps of John Maynard Keynes, most economists hold that one cannot have complete trust in a market economy, which is seen as inherently unstable. If left free, the market economy could lead to self-destruction, hence the need for the government and the central bank to manage the economy. Successful management in the Keynesian

Many economists, including Milton Friedman, have believed that since it is impossible to establish “how things really work,” the underlying assumptions of a model are unimportant. Anything goes provided the model can yield good predictions. Friedman wrote : The ultimate goal of a positive science is the development of a theory or hypothesis that

Most economists believe that a general decline in the prices of goods and services is bad news because it is associated with major economic slumps such as the Great Depression. In July 1932, the yearly growth rate of US industrial production stood at –31 percent whilst in September 1932 the yearly growth rate of the US Consumer Price Index (CPI)

Most economists hypothesize that in the real world there are relationships between various economic variables. For instance, the relation between personal consumption expenditure and income after tax can be hypothesized as: Personal consumption = a * Income after tax, With a being a parameter. Thus, if a is 0.8 then for income after tax of $100

According to the Austrian business cycle theory, the boom-bust cycle emerges in response to a deviation in the market interest rate from the natural interest rate, or the equilibrium interest rate. As a rule, it is held, the tampering with market interest rates by the central bank sets the boom-bust cycle in motion. Given this viewpoint, one might

Why is inflation regarded as bad news? What kind of damage does it do? Popular commentators maintain that inflation causes speculative buying, which generates waste. Inflation, it is maintained, also erodes the real incomes of pensioners and low-income earners and causes a misallocation of resources. Despite all these assertions regarding the side

On Wednesday, November 2, 2022, the Fed raised the target for the policy rate by 0.75 percent, to 4.00 percent, for the fourth time in a row. Fed chairman Jerome Powell hinted that the policy rate target is likely to be lifted further ahead. For most economists and commentators, the Fed’s monetary policy is the heart of the interest rate

The US personal savings rate eased in September to 3.1 percent from 3.4 percent in August. In September 2021 the savings rate stood at 7.9 percent. By popular thinking, a decline in the savings rate during an economic slowdown is regarded as supporting economic activity. In the National Income and Product Accounts (NIPA), savings are established