Mercantilism was the dominant economic theory and practice in Europe from the 16th to the 18th … MercantilismRead more
Economic Glossary
Understand economic terms, the economy and related fields.
Economic Externalities
Economic externalities are unintended side effects of economic activities that impact third parties, either positively (e.g., education benefits society) or negatively (e.g., pollution harms public health). These spillover effects lead to market inefficiencies, as costs or benefits aren’t reflected in prices. Governments address externalities through tools like taxes (Pigouvian taxes), subsidies, regulations, and tradable permits (cap-and-trade). Understanding externalities helps policymakers and businesses align private incentives with social welfare for better economic outcomes.
The Gold Standard
The gold standard tied currency values directly to gold, ensuring stability but limiting economic flexibility. Learn how it worked, its pros (price stability, trust) and cons (deflation risks, policy constraints), and why most nations abandoned it for fiat money.
What Is Inflation in Economics?
Inflation is the sustained rise in the general price level of goods and services, reducing money’s purchasing power over time. It is measured by indices like the Consumer Price Index (CPI) and driven by factors such as demand-pull (excess demand), cost-push (rising production costs), monetary expansion, or wage-price spirals.
While mild inflation (2-3%) can stimulate spending and reduce debt burdens, high inflation erodes savings, creates uncertainty, and may spiral into hyperinflation (e.g., Zimbabwe, Venezuela). Central banks, like the Federal Reserve, combat inflation using interest rates and monetary policies.
Post-COVID, global inflation surged due to supply chain disruptions and stimulus spending, prompting aggressive rate hikes in 2023–2024. Managing inflation remains critical for economic stability.
What Is DEI Theory? A Brief Explanation
Diversity, Equity, and Inclusion (DEI) theory has been shaped by key research highlighting systemic inequities and the tangible benefits of diversity
The Triffin Dilemma
The Triffin Dilemma – the paradox that makes global dollar dominance both necessary and destabilizing – continues shaping 21st century economics. As the U.S. walks this monetary tightrope, emerging alternatives from CBDCs to commodity-backed currencies suggest the system may be approaching an inflection point unseen since 1971.
Mondragón Corporation: A Comprehensive Analysis
The Mondragón Corporation represents history’s most ambitious experiment in worker-owned enterprise – a €12 billion cooperative federation that competes globally while maintaining radical workplace democracy. This 70-year-old Basque model proves alternatives to traditional capitalism exist, though not without contradictions. Our analysis explores how Mondragón balances cooperative ideals with market realities, offering lessons for equitable economic development worldwide.
Deflation
Deflation—a sustained drop in the general price level of goods and services—represents the inverse of inflation, increasing money’s purchasing power but risking economic stagnation. Key characteristics include falling prices, reduced consumer spending, higher real debt burdens, and potential job losses. Causes range from decreased demand and technological advances to tight monetary policies, while effects can be short-term gains for consumers versus long-term risks like recessionary spirals. Historical examples like the Great Depression and Japan’s “Lost Decade” illustrate its dangers. Governments combat deflation through monetary easing and fiscal stimulus. This guide explores deflation’s mechanics, impacts, and policy responses.
Stagflation
Stagflation is an economic paradox combining stagnant growth, high unemployment, and rising prices – a scenario that defies traditional economic models. This rare phenomenon creates unique policy challenges as standard inflation-fighting tools can worsen unemployment, while growth-stimulating measures may fuel further inflation.