Hyperinflation is a phrase used to describe an economy’s rapid, excessive, and out-of-control price increases. While inflation is a measure of the rate at which prices for goods and services rise, hyperinflation is when prices rise at a rate of more than 50% each month. What factors contribute to rapid inflation? Inflation is the rate […]
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The theory of money The theory of inflation asserts that inflation is caused by an increase in the money supply. Inflation rises faster as the money supply grows faster. In specifically, a 1% increase in the money supply leads to a 1% increase in inflation. The price level is proportional to the money supply when […]
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AFTER NEARLY TEN YEARS OF RECOVERY FROM THE FINANCIAL CRISIS, AMERICAN MONETARY POLICYMAKERS STILL FIND INFLATION TO BE EXTREMELY QUIET. When price pressures appear to be building, they quickly vanish. The most recent high point occurred in July of 2018. Inflation was 2.4 percent, as measured by the personal consumption expenditure (PCE) index, which the […]
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Sales taxes and other excise taxes are examples of indirect business taxes that businesses collect but are not counted as part of their profits. As a result, indirect business taxes are included in the income approach to computing GDP rather than the spending approach. Are taxes included in the GDP? Revenues received from income and […]
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The sale price agreed upon by a willing buyer and seller is known as fair value. The market where a stock is traded determines the stock’s fair value. When a subsidiary firm’s financial accounts are consolidated with a parent business, fair value also indicates the worth of its assets and liabilities. Is fair market value […]
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Stock index futures, such as the S&P 500 E-mini Futures (ES), reflect expectations for a stock index’s price at a later date, based on dividends and interest rates. Index futures are two-party agreements that are considered a zero-sum game because when one party wins, the other loses, and there is no net wealth transfer. While […]
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The bond market has had an incredible run as of 2Q2020, with TLT now exceeding the S&P 500 year-to-date. Don’t dismiss bonds the next time you see them. It’s wonderful to have better rewards with less risk. Go Long Gold Gold is a hard asset that performs well during economic downturns. Gold is a commodity […]
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GDP only counts final output of goods and services, not the production of intermediate commodities or the value of labor in the supply chain, to avoid double counting (adding the value of output to the GDP more than once). What are the two methods for not counting twice? What is the difference between market-priced national […]
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Interest payments and increases in the principal of Treasury Inflation-Protected Securities (TIPS) are subject to federal taxation, but are exempt from state and local income taxes. The sum of the semiannual interest payments paid in a given year is shown on Form 1099-INT. The amount by which the principal of your TIPS rose or decreased […]
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Last year, the Chicago Mercantile Exchange launched the world’s first water futures market, allowing farmers, investors, governments, and hedge funds to purchase a legal agreement known as a “futures contract” that locks in a predetermined price for water to be used in the future. If a natural disaster, such as a drought, raises the price, […]
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