The Marginal Revolution

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The decade of 1870 supposed a radical break with the previous political economy; this break was called the marginalist revolution, promulgated by three economists: English William Stanley Jevons; the Austrian Anton Menger; and the Frenchman Léon Walras. His great contribution consisted in substituting the theory of labor value with the theory of value based on […]

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The Invisible Hand

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The theory of the invisible hand is a metaphor that points to the market economy as a tool capable of achieving maximum social welfare while seeking self-interest. The British economist Adam Smith coined the concept of an invisible hand in the eighteenth century to describe the natural self-regulating phenomenon of the free market. A process […]

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Division of Labor – Understanding Economics

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The division of labor refers to the number of different tasks in which the work necessary for the production of a good or service is distributed, tasks that must be performed by different workers specialized in each one of them. For Smith the very purpose of economics was to know the laws that determined the […]

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Public Debt – Understanding Economics

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Public debt is the money that the state has borrowed to finance its spending and investment. When we speak of State we do not necessarily refer to the central government, but can be any level of government. Town councils, provincial councils, autonomous communities, etc. Public debt is understood as the set of outstanding obligations maintained […]

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Exchange rate – Understanding Economics

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When speaking of exchange rate, it is usually referred to the exchange association that can be established between two currencies of different nations. This information allows you to know how much of an X coin can be obtained by offering a Y coin. In other words, the exchange rate indicates how much money I can […]

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Money functions – Understanding economics

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The primary function of money is intermediation in the process of change. The goods have a price, which comes from the relative value of some goods with respect to the others. These relationships originate in the comparison of the value of said goods and in the contingencies of the market. The functions of money are […]

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Balance of payments – Understanding Economics

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The relationship between the amount of money a country spends abroad and the amount it gets from other nations. The balance of payments concept includes not only trade in goods and services, but also the movement of other capital, such as development aid, foreign investment, military expenditures and the repayment of public debt. Nations have […]

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Gross Domestic Product – Understanding Economics

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Gross domestic product (GDP) or gross domestic product is an economic indicator used to measure output in a given country. It is defined as the total value of production (value of goods and services produced) within a given country in a year (determined by economic agents residing within the national territory). It is also a […]

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Monetarism – Understanding Economics

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Monetarism is a macroeconomic theory that deals with analyzing the money supply or slope of economic thinking that deals with the effects of money on the economy in general. Monetarism is identified with a particular interpretation of the way in which the supply of money affects other variables such as price, production and employment. It […]

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Keynesianism – Understanding Economics

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Keynesianism is one of the best known economic theories, its main feature is that it supports interventionism as the best way out of a crisis. It owes its name to the British economist John Maynard Keynes, who focused his career on studying economic aggregates and economic cycles. The main elements of this current of thought […]

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