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Why do individuals pay much higher prices for some goods versus other goods? To provide an answer to this question economists refer to the law of diminishing marginal utility. Mainstream economics explains the law of diminishing marginal utility in terms of the satisfaction that one derives from consuming a particular good. For instance, an

Listen to  the  Audio Mises Wire  version  of this article. For most experts a key factor that policymakers should be watching is the ratio between actual real output and potential real output. The potential output is the maximum output that the economy could attain if all resources are used efficiently. In Q3 2020, the US real GDP–to–potential US

In a market economy, a major service that money provides is that of the medium of exchange. Producers exchange their goods for money and then exchange money for other goods. As the production of goods and services increases, this results in a greater demand for the services of the medium of exchange (the service that money provides). Conversely,

Some economists believe that the increase in the minimum wage will boost unemployment, while other economists think otherwise. Hence, they believe that raising the minimum wage would raise the living standards of workers. For example, in a study conducted in the 1990s, economists David Card and Alan Krueger  examined a minimum-wage rise in New

After closing at 1.051 at the end of December 2016, the price of the Euro in US dollar terms settled at 1.2321 at the end of March this year – an increase of 17.2%. But, a currency exchange rate appears to be moving in response to so many factors that it makes it almost impossible to ascertain where the exchange rate is likely to be headed. 

The leading monetarist, Milton Friedman, blamed the Federal Reserve System’s policies for causing the Great Depression of the 1930s. According to Friedman, the Fed failed to pump enough reserves into the banking system to prevent a collapse of the money stock. Because of this,  Friedman held that M1, which stood at $26.34 billion on March 1930,

Many commentators consider the spread between the long-term interest rate and the short-term interest rate as an important indicator to establish the future course of economic activity. An increase in the spread is seen as pointing toward good economic times ahead. Conversely, a declining spread raises the likelihood of an economic recession.

According to popular thinking, not every increase in the supply of money will have an effect on economic activity. For instance, if an increase in supply is matched by a corresponding increase in the demand for money, we are told, then there won’t be any effect on the economy. The increase in the supply of money is neutralized, so to speak, by an

According to some commentators the US federal budget deficit still remains a major economic problem notwithstanding that it draws less attention than in the past . The Federal Government budget had a surplus of $33.4 billion in September against a surplus of $90.9 billion in September last year. The 12-month moving average of the Federal

A very good visual correlation between the yearly percentage change in the consumer price index (CPI) and the yearly percentage change in the price of oil seems to provide support to the popular thinking that future changes in price inflation in the US are likely to be set by the yearly growth rate in the price of oil (see chart). But is it valid