Deriving the Aggregate Demand Curve

Check out this graph: For a given nominal money stock, a price level decrease increases the real money stock. This shifts the LM curve outward, and the interest rate goes down and income increases. Therefore, along the AD curve, a price level decrease )holding the...

Money Creation – Where Does the Money Come From?

How Banks Create Money continued One of our popular posts located here talks about ‘how banks create money’. You should read that link before this one as it is the necessary part 1 of this series on money creation. A lot of people think it’s a huge...

Internal Rate of Return, Cash Flow, and NPV

Calculating and Interpreting Internal Rate of Return (IRR) This post continues a discussion about cash flow, net present value, and interest rates and NPV, which you can read by clicking on the specific links. This post deals with the topic of internal rate of return....

Determining Net Present Value of Cash Flow

We started a discussion on the importance and description of cash flow for the operating firm. You can find that post here: cash flow intro. Moving forward now to the topic of net present value of cash flow (or NPV). An investment project generally should be...

Efficiency and Improvement Theories

Economics is a study of choices and how you make those choices can be defined. Be it to maximize utility, to increase profit, or to improve a situation. Here are some: 1) Pareto Efficiency: a state where it is not possible to make one better without worsening another....

How to Predict Foreign Exchange Movements

The reason domestic currencies drop may baffle some newbie FOREX investors since many movements are rooted in what are called ‘expectations’. You see, currency movements move up or down (depreciate or appreciate) based on expectations and/or real...