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In economics Too Big To Fail (TBTF) can have slightly different meaning depending on what research you are looking at but generally speaking literature seems to agree that what matters is how interconnected or systemically important firm is (e.g. see Bernanke 2010; Zhou, 2009). Systemically important firms are such that other firms critically depend on them....


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Use or consumption of natural resources is not in mainstream economics considered as an externality per se. First of all the quote from Mankiw is probably from undergraduate textbook and taken out of context as it is incomplete. For example according to Economics by Mankiw and Taylor (2014) 3rd ed the externality is defined as: the cost or benefit of ...


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Yes, a commodity space is the set of all possible commodity bundles. The simplest Micro 101 example is typically the nonnegative quadrant of $\mathbb{R}^2$, but in general equilibrium theory it is often assumed to be infinite-dimensional since there are infinitely many commodities (each good is differentiated by time and space, etc.).


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Personal consumption expenditure (PCE) is the primary measure of consumer spending on goods and services in the U.S. economy. It accounts for about two-thirds of domestic final spending, and thus it is the primary engine that drives future economic growth. PCE shows how much of the income earned by households is being spent on current consumption as ...


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Well this is 'exponential discounting'. An infinite sum of geometric series: $$\sum R+ R\delta + R\delta^2.... R\delta^t = \frac{R}{1-\delta}, \text{ if } |\delta|<1$$ Now lets call the denominator rho $1-\delta= \rho$. The exponential discounting is there since its an infinite sum of geometric series. Edit: In response to Giskard's +1 comment I tried to ...


4

Consider a game with private information such as a privately known willingness-to-pay or any other type. We usually model this as a game in which at first "Nature" draws the type and then players make their moves. Such games do not have proper subgames because a proper subgame never splits up an information set and Nature's first move connects the ...


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It is true that mainstream economics (which includes neoclasicall economics) is empirical but note that any explanation can only arise from theory (whether theory is explicitly formulated or only implicit in the background), and any theory is based upon assumptions. Empiricism does not mean you don't build theoretical models with assumptions, it means you ...


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Any labor may be considered as a 'bad' (service) for which you are compensated by the firm by paying you salary/wages. In modeling labor market, this is generally described in the opposite sense, i.e., consuming leisure. When you work you let go of leisure, which is a good. So that, technically, makes supplying labor (which is a service) as an economic bad.


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Decision under uncertainty is sometimes called a "game against chance", and can thus be modeled as a two-player normal form game: the decision-maker vs Nature/Chance. The possible states would form a set of pure strategies for Nature, and Nature commits to a publicly known mixed strategy that randomizes over those pure strategies (assume Nature is ...


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An answer (I am not sure this is the right one) is if the "positive rate $\rho$" refers to an interest rate. Sometimes interest rates are referred to as discount rates. In this case we would have a discount factor of $1/(1+ \rho)$, and the usual present value formula for a perpetual annuity yields $$\frac{R}{1+ \rho} + \frac{R}{(1+ \rho)^2} + \frac{...


3

For most part different 'schools of thought' do not have different definitions of terms. New Keynesian definition of GDP is the same as Keynesian definition of GDP or Neoclassical definition of GDP or any other 'school of thought' that you can think of. Marginal utility also has the same definition across economics. This is because terminology is not about ...


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Two notes. A. "Conditioning on information" has always been applied in economics without much attention to probability theory-rigor, because it has (indeed) such a strong intuitive sense: "based on the information I have (where "information" here means data, processing algorithms, psychological makeup, almost anything) I somehow form ...


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I would like to get some help figuring out the basic concepts and definitions in order to address these type of questions. Namely, how to distribute income among population in the best way for the collective. There is actually no single best way of distributing income for the 'collective'. This is because what is best depends on normative judgement. What is ...


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This is because it does not make sense to compare chosen options to all other alternatives that are mutually exclusive. For example, if you have 5 choices A, B, C, D, E, you can choose one, and C is the most preferred option it does not make any sense to compare picking C to jointly picking A, B, D and E. Only one of the other options can be pick so you ...


3

Put on your institutional hat. And make a distinction between fixed assets, like land, and the ownership of fixed assets: capital. See the European System of National Accounts 2010 p. 73.


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A structural reform is a reform that literally tries to change the fabric or structure of an economy. A structural reform has to significantly change the regulatory or institutional framework in which economy operates. For example if a country has inflexible labor market laws and they change them to flexible labor laws that actually changes the structure of ...


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“Private sector” financing or “non-government” financing will certainly be most clear. “Market” financing is succinct but it can be confused with “capital market” financing, that is, borrowing by issuing tradable debt instruments. “Alternative” financing is generally used to refer to non-bank, non-capital-market financing, such as borrowing from private ...


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Yes, marketing falls under the JEL code of M, specifically M31.


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Growth of GDP is generally reported quarterly on YoY basis in real terms, i.e., the growth rate of 5% means increase of GDP in current quarter by 5% as compared to GDP in same quarter previous year in real terms. As with most macroeconomic variables, GDP has seasonality and that is why the QoQ is not reported. For example for india the FY Q1 (Calender Q2) ...


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Virtually same question was already addressed at quantitative finance stack by user Matthew Gunn. The answer there can be summed as: Financial economics is what economics calls finance. Finance is what finance calls finance. Less flippantly though, there's a long debate on whether finance is a subfield of economics, ... Prof. Milton Friedman famously ...


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"Lemonization" I guess. I didn't exactly make up that term with that meaning, but I suspect you won't see it often.


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this was answer to the original question before user completely edited it to something else You are asking several different questions: Do barriers to entry increase the (collective) market power of incumbent suppliers? Not generally. For example, in Bertrand price competition firms will have no market power even if there are barriers to entry. Even ...


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As far as I understand these terms are used almost interchangeably with the former term being more wide while the later applies more specifically to visualization of the term structure. According to Mishkin and Eakins, Financial Markets and Institutions. 8ed, in chapter 5 pp137 on Term Structure of Interest Rates: A plot of the yields on bonds with ...


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GDP is by definition the the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. It is meant to be a broad measure of domestic production (i.e. how much final goods and services are produced in a given amount of time at market value). When GDP increases that means that the ...


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My best definition: lobbying to gain special privileges from the government. Rent refers to the concept of economic rent. Economic rent can be thought of as profit. The amount earned beyond costs. So rent seeking is looking to make more profit and specifically make more profit without producing anymore wealth. The best way of doing this is to rig the rules ...


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I realized my mistake whilst writing this, so I will just share the answer as well. Essentially my mistake was, that I assumed this aspect of the definition ($E[z|x_g] = 0\ \forall\ x_g$) to mean that the expected value of z has to be 0 given, that we are in the lottery that is given by the random variable $x_g$. This reading was however wrong. It actually ...


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In economic models, K is commonly used to represent "capital." This is presumably due to the fact that German for capital is "kapital," and also to the fact the C is more commonly used to represent consumption. There is no difference in meaning between labor and labour. Labor is the preferred spelling in American English, and labour is preferred throughout ...


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