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Loose monetary policy of the central bank, which amounts to the lowering of interest rates and monetary pumping, gives rise to activities that cannot exist by themselves without the support from this loose monetary policy. An increase in money supply as a result of an easy monetary stance by the central bank sets an exchange of nothing for

In July, the US unemployment rate fell 0.1% from the month before to 3.9%. The number of unemployed individuals fell by 284,000 to 6.280 million. Many commentators have expressed satisfaction with the decline in the unemployment rate. For them this implies a strong economy. For most economists the key to economic growth is a strengthening in the

Most experts agree that through the manipulation of short-term interest rates, the central bank by means of expectations regarding future interest rate policy, can also dictate the direction of long-term interest rates. In this way of thinking expectations regarding future short-term interest rates are instrumental in setting the long-term rates.

For most experts the key factor that sets the foundation for healthy economic fundamentals is a stable price level as depicted by the consumer price index. In this way of thinking, a stable price level ensures the visibility of the relative changes in the prices of goods and services. Consequently, it is held, this leads to the efficient use of

In the Austrian view, every individual is seen as employing the resources or means at his disposal in order to secure various ends. The use of resources is not done haphazardly but in accordance with an individual’s priorities. The individual ranks various ends or goals that he wants to attain.  The Menger Explanation of How Valuations Are Formed

Many commentators are of the view that the US central bank should pursue policies that will prevent the possible decline of the economy into a liquidity trap hole. What is this all about? In the popular framework of thinking that originates from the writings of John Maynard Keynes, economic activity is presented in terms of a circular flow of

One of the few things economists agree on is that prices are determined by supply and demand. This is summarized by means of supply and demand curves, which describe the relationship between the prices and the quantity of goods supplied and demanded. Within the framework of supply-demand curves, an increase in the price of a good is associated

Most experts are of the view that as the economy gains strength the Fed must step in at some stage and introduce a tighter stance in order to prevent the rate of inflation getting out of control. Why however, should economic growth be positively associated with a general increase in the prices of goods and services? Let us examine how prices in

For most economists and financial commentators the heart of economic growth is the increase in the demand for goods and services. It is held that increases or decreases in demand are behind rises and declines in the economy’s production of goods and services. It is also held that the overall economy’s output increases by a multiple of the change

According to some commentators on the gold standard, an increase in the supply of gold generates similar distortions as money out of “thin air” does. Let us start with a barter economy. John the miner produces ten ounces of gold. The reason why he mines gold is because he believes there is a market for it. Gold contributes to the well-being of