The spot exchange rate, also known simply as the spot rate, is the current price at which one currency can be traded for another for immediate delivery. This rate is crucial for anyone involved in international business, finance, or simply traveling
Economic Context
Trade Balance: Understanding the Flow of Goods and Currency + Formula, Impacts, Determinants
What's it: Trade balance is the difference between the country's export value and its import over a certain period. When exports' value exceeds imports, the country runs a positive trade balance (trade surplus). Meanwhile, if the value of
Marginal Product: Meaning, How To Calculate It
What's it: Marginal product refers to the additional output produced when a firm uses one additional input unit, assuming the other inputs are constant. Another term for the marginal product is a marginal return or marginal productivity.How to
Why Are Economic Resources Scarce?
Economic resources are scarce not only because they are few in number. It doesn't stand alone. You have to compare it with other concepts, namely needs and wants. Scarcity occurs because resources are limited to satisfy our unlimited needs and
Economic Profit: Meaning, Formula, and Key Factors
What's it: Economic profit is the difference between revenue and total costs (implicit costs plus explicit costs). This is another measure of profit besides accounting profit. Implicit costs represent opportunity costs when a firm chooses to use a
Regional Trade Agreement: Weighing the Impact – Types, Pros, and Cons
A regional trade agreement (RTA) is a pact between several countries in a specific geographic region. These agreements aim to break down trade barriers and foster deeper economic ties between member countries. By creating a more integrated economic
Capital Flow Control: Balancing Stability vs. Growth (Pros, Cons & Examples)
What's it? Capital flow control, often shortened to capital control, is a tool employed by governments and central banks to manage the movement of money across their borders. This strategy aims to influence the flow of capital, which encompasses
Trade Surplus: Impact on Growth & Currency + Pros, Cons
What's it: A trade surplus is when the value of a country's exports exceeds its imports. In other words, the country reports a positive trade balance. Since international trade involves two different currencies for payment, a surplus also affects the
Economic Crisis: Understanding Downturns and Recoveries [Types and Effects]
Economic crisis disrupts the smooth functioning of an economy, causing widespread hardship. Understanding economic crises – what causes them, how they impact economies, and how to navigate them – is crucial in staying informed about major economic
Dollarization Explained: How It Works, Example, Pros, and Cons
What's it? Dollarization means adopting the U.S. dollar as a currency and unit of account by countries other than the United States. The term also has a broader meaning: the adoption of foreign currency by a country other than its issuing country.
Free Trade Area: Expanding Markets, Raising Concerns + Examples, Pros, Cons
A free trade area (FTA) is a pact between several countries in a specific region aimed at boosting trade and economic ties. Within an FTA, member countries agree to eliminate barriers to trade in goods amongst themselves. This can involve removing
Monetarism Explained: Controlling Inflation Through Money Supply [+Core Principles]
Monetarism is a powerful economic theory that argues controlling the money supply is the primary tool to influence economic activity and combat inflation. Economists and investors use this theory to understand how changes in the amount of money