Qualitative and quantitative research

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How is it that the bank creates money?

Yes, you read that correctly. Banks create money like magic, but behind every magic spell there is a trick, which we will reveal with the following example: The bank received 100$ as a deposit, loaned 90$ to Mr. Joe and kept a 10% as legal proof. Mr. Joe bought an ice cream machine and the seller of the machine deposited those 90$ in the bank; then the bank loaned 81$ to Margaret, again keeping a 10% as legal proof. With the money, Margaret bought a sewing machine to start up her own business; the seller of the sewing machine deposited that money in the bank, which finally loaned 73$ to Joanne who wanted to start a bakery.

So now let us see how much money the bank created with the initial 100$

90 + 81 + 73 = 244; which is more than half of the original 100$


PREGUNTAS Y RESPUESTAS SOBRE ECONOMÍA

Oil prices suffer what it seems to be an infinite surplus

The fall of oil prices will keep affecting the international reserves of the OPEC countries.

The futures of oil for the month of October suffered a huge drop. The West Texas Intermediate as an american reference fell for more than a 3%, reaching 46,6$, while the european Brent went with a 2%, reaching 49$ per tank. The surplus has not disappeared and the discrepancy seems to rattle within the OPEC.

But, what are international reserves? Acquire PREGUNTAS PREGUNTAS Y RESPUESTAS SOBRE ECONOMíA to get a better comprehension of the news that move the world.

What do we understand by economics?

Everything you have to know about economics explained easy.

Every time we decide in what we want to spend our money, we are taking an economic decision. When we buy a car instead of going on vacation or we prefer to spend more time with our families instead of working extra hours, we are choosing a thing or another because we cannot or should not do both. In the exact same way we can choose, families, businesses and governments also have to decide how to manage their resources, because they are not never infinite. Even the richest people in the world have limits for expenses, they should be picky in what to spend their money. No one escapes the necesity to pick between the different alternatives for resource use.

Having said that, we can define economics as the study of our choices of scarce resource administration, subject to different uses; therefore, economics as a practice is as old as mankind itself.

The globalized market requires knowledge about economics. Economics -as a science-, is ubiquitous, it is everywhere, both in past and present. The different views on economics imply the ways of approximation to an universal problem, the subsistence towards organization of available resources and the structure that composes it.

If you want to delve deeper into economics and finance with every single aspect properly explaines, you will be able to find the answers in PREGUNTAS YRESPUESTAS SOBRE ECONOMÍA.

Inside you will find a clear and easily explained perspective on the things that really affect you, what happens in our global village. News with economic data will not be dull and boring anymore. Learning about economics, explained easily, is an imperative, even subject to our electoral power; it is a necesity.

To the bachelor student in areas close to economics and social sciences in general, it will be a necessary tool where you will get a closer look into subjects like: classic economics, monetary economy, the marginalist school, the neoclassical synthesis, general equilibrium, demand and supply, economics and finance, oil economy, economic cycles, marxist economy, family economics and approcimations to the problematics in economic development.

Click on the cover to acquire it and start to learn something that will accompany you for the rest of your life and will be useful from now on.

What do we understand by Interest Rate?

Let us imagine for a moment that we have won two prizes worth 10,000 $ each, but we can only choose one of them, if we accept one we cannot claim the other one. The first prize is redeemable today, the second one is redeemable in 2 years. Which one should we choose? It seems evident that we will choose the one we can claim today since the money seems to be worth more today than in a couple of years. Now, let us suppose that in turn, in two years, the second prize is redeemable with an added bonus of 5,000 $ as a reward for our waiting. Which prize would we choose then? In this case we would probably still choose the first prize if we really were short in cash. That reward of 5,000 $ given for waiting is what is called interest rate and it is equivalent to the value given to money overtime. In other words, if we feel indifferent about having 10,000 $ now and 15,000 $ it is because we feel that it will have the same purchasing power.

It is also noted that the interest rate is billed over a determined sum of money. In that way, for example, its value could be the half, sixth part, fifth part, tenth part or any fraction of the initial amount. If our initial amount is 100 and it is said that our interest rate is the tenth part of the initial sum, that would mean we have a 10% interest rate, and if it would have been the half, we would be talking about a 50% interest rate.

What is nominal interest rate?

This is the kind of interest rate which is often talked about, the one we often hear people talking about. The nominal interest rate is the interest rate in actual to-day prices.

What is the real interest rate?

As we mentioned earlier, the interest rate represents a reward for postponing our present consumption with the intent of receiving more money in the future. When said reward is expressed in the quantity of goods and services we can buy with it that is what we call real interest rate. Better said, it is the interest rate resulting from considering the effects of inflation, which diminish the value of our earned interest rate. Most formally we could say:

Real Interest Rate = Nominal Interest Rate – Inflation

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