Posts Tagged ‘one minute’

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The Great Depression Explained in One Minute

The great depression was a dramatic worldwide economic calamity which started in 1929 and lasted until the late 30s. Most people believe that it began with the US stock market collapse on October 29. By 1932, US stocks were only worth 20% of what they were prior to the crisis. One year later, almost half of all United States banks had failed. By 1935, roughly 750,000 farms had […]

The Unemployment Rate and the Labor Force Participation Rate Compared in One Minute

The labor force participation rate tells us which percentage of the entire working age population is economically active. In other words, it tells us which percentage of the people capable of working are actually working or at least looking for a job. Let us assume that you live in a country with 10 million working age people. We will also assume 5 million are currently working and 500,000 are […]

Bank Runs Explained in One Minute: How Banks Become Insolvent and Fail

As mentioned in the fractional reserve banking video, only a fraction of the currency in existence is actually tangible, so paper money and coins. Let us assume that Bank A like any other banks has customers who trust it with their money for various reasons. Some create bank deposits, some simply keep spending money in their bank accounts and so on. These people are legally allowed to go […]

Zero-Sum Games and Win-Win/Lose-Lose Situations Compared in One Minute

Zero-sum games are basically situations in which one person gains and the other participant loses. Some people refer them as win-lose or lose-win situations. Let's assume Mike and Peter bet on the outcome of a tennis match. There is no such thing as a draw on tennis. So, someone has to win and therefore tennis itself is a zero-sum game. The bet between Mike and Peter is a zero-sum situation. If Mike wins, Peter […]

Economic Indicators Explained in One Minute: From Forex & Stock Trading to Macroeconomics

Economic indicators are seen as pieces of a puzzle. They tell you something specific and together help you create an accurate picture of reality. There are three broad types of indicators. Leading indicators which tend to change before the economy as a whole changes. Building permits are a good example because if you notice that people and companies have less and less appetite for building, it is a warning sign that […]

The World Trade Organization (WTO) Explained in One Minute

The World Trade Organization is the entity which regulates international trade since January 1st, 1995. The main goal of the WTO is creating a level playing field by setting and enforcing rules, so that the 164 countries which are currently members, who can trade with one another smoothly. Here is how it works. In theory, rules can be created or altered through a majority vote, but in most […]

Counterparty Risk (Default Risk) Explained in One Minute

As the name suggests, counterparty risk is basically the risk that the other party want to fulfill its obligations towards you. Let's assume that Mike decides to keep $10,000 at home and John decides to keep 10 gold coins at home. These are situations with no counterparty risk, because well, no other party exists. It is just Mike and his money and of course John and his coins. Mike […]

How Money Works Explained in One Minute

Before money was used, peope simply bartered. Person one gave person two some eggs and received wood in return. But for this transaction to happen, person one has to want wood and person two has to want eggs. If person one does not want wood and wants a knife instead, then person two has to first find person three, who is willing to give him a knife […]

The Gross Domestic Product (GDP) and Government Revenue Explained in One Minute

Contrary to what most people think, the gross domestic product or GDP does not tell you how much money your government made during a certain year. Instead, it tells you how much everyone generated that year combined with your country's borders, from employees who sell their time to businesses who sell products or services. All economic participants sell something and that is […]

The International Monetary Fund (IMF) and the World Bank Explained in One Minute

The International Monetary Fund and the World Bank have been founded just like the United Nations after the World War 2. Why? Mainly because after the war, everyone wanted peace. However, peace on an empty stomach is hard to maintain. So, these two institutions were meant to help the economic stability of the world. Both of them are basically banks, but instead of being started by individuals like regular banks, they […]

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