Economy

How economies work.

The parts of economics that decide asset prices, rather than the parts that decide exam marks. Where money comes from, why one interest rate sets every other price, why debt makes booms and busts bigger than they would otherwise be, and what a country can and cannot choose about its currency.

Where this stands

All 9 lessons are written.

Every lesson here is a node on the concept map, and the tutor knows all of them whether or not the lesson exists yet.

EC1 · 11 min

Opportunity cost and marginal thinking

The cost of anything is the best thing you gave up to get it.

EC2 · 11 min

Supply, demand, and price as information

A price is a message about scarcity that nobody had to write.

EC3 · 11 min

Comparative advantage and trade

Both sides gain from trade even when one of them is better at everything.

EC4 · 12 min

Externalities and market failure

Markets fail in specific, nameable ways, and so do the interventions aimed at fixing them.

EC5 · 11 min

GDP, inflation, unemployment

Three numbers that run policy, and what each one leaves out.

EC6 · 11 min

How money is created

Banks create deposits when they lend. The money did not come out of anyone's savings.

EC7 · 11 min

Interest rates as the master price

Every other price is quoted, directly or not, against the cost of time.

EC8 · 12 min

Credit cycles

Debt lets spending run ahead of income for years, and the repayment is the recession.

EC9 · 12 min

Balance of payments and the trilemma

A country can fix its exchange rate, allow free capital, or set its own rates. Two of the three.