New on FinoLib · Volume I: Global Economy
I have just published a new article on FinoLib, my free finance education library: Supply and Demand Curves Explained, Plus GDP, Trade and Gold. It is part of Volume I: Global Economy. Below is a summary of the topic in plain, expert language, so you can follow the idea even before you open the full article.
1.2 Supply and Demand — The Engine Behind Every Price
The idea in plain words
Prices settle where the quantity buyers want equals the quantity sellers offer, and they move whenever either side changes. How far a price moves depends on elasticity, which is why energy and food swing the most.
Key points
■Above the equilibrium price unsold stock piles up and sellers cut prices; below it, shortages let sellers raise them.
■With a short-run oil demand elasticity of −0.25, a 2% supply loss needs an 8% price rise.
A closer look
Demand is how much of something people want to buy at a given price, and supply is how much of it is available at that price. The equilibrium price is the price at which the quantity buyers want equals the quantity sellers offer.
1.3 GDP — Measuring the Size of an Economy
The idea in plain words
GDP is the market value of all final goods and services produced inside a country’s borders in a period. Real GDP strips out price changes, so it shows actual growth. Recessions are dated by judgment of broad, significant declines, not by a simple two-quarter rule.
Key points
■“Final” means sold to the end user, so the steel inside a car is not counted twice, and a Japanese-owned factory in Ohio adds to US GDP.
■US GDP in 2025 grew 5.0% in nominal terms, of which 2.6% was prices and 2.3% was real growth.
A closer look
GDP (gross domestic product) is the total market value of all final goods and services produced within a country’s borders in a given period. “Final” means sold to the end user, so the steel inside a car is not counted twice. “Within its borders” means a Japanese-owned factory in Ohio adds to US GDP.
A worked example
Worked Example: Nominal vs Real GDP, United States 2025
Nominal GDP grows for two reasons: more output and higher prices. Real GDP strips out the second. Step Formula and substitution Result Nominal growth $30,861 billion ÷ $29,381 billion − 1 +5.0% Price growth (GDP price index) 128.893 ÷ 125.587 − 1 +2.6% Real growth (1 + nominal) ÷ (1 + price) − 1 = 1.0504 ÷ 1.0263 − 1 +2.3% About half of the dollar growth in 2025 was higher prices rather than more goods and services. Figures as of Oct 2026: annual 2025 values after BEA’s latest revisions; they can be revised again. Sources: BEA, Gross Domestic Product; NBER Business Cycle Dating; BEA, GDP Q2 2022 advance estimate.
1.4 International Trade — Why Countries Buy and Sell to Each Other
The idea in plain words
Countries gain from trade because of comparative advantage, not absolute advantage: each should specialize in what it gives up least to make, and trade at a price between the two countries’ costs. Both then consume more. Tariffs are taxes on imports, and their cost falls on the importing country.
Key points
■In the worked example, two countries with 400 hours of labor each trade at 1 software for 3 batches of shirts, a price between A’s cost of 2 and B’s of 4.
■After trade, A ends with 22 software and 42 batches of shirts, against 20 and 40 without trade.
A closer look
An export is something a country produces and sells to another country. An import is something it buys from another country. The difference between exports and imports is called the trade balance. If imports exceed exports, that is a trade deficit. If exports exceed imports, that is a trade surplus.
1.5 Gold — The Timeless Monetary Anchor
The idea in plain words
Gold is scarce and durable, and central banks still hold about 39,000 tonnes of it, roughly 18% of all gold ever mined. Its price usually falls when the dollar or real interest rates rise, because gold pays no income, but heavy central-bank buying has overridden that link since 2022.
Key points
■All the gold ever mined, about 222,600 metric tons by mid-2026, would form a single cube roughly 22.6 meters on each side.
■A 10-year Treasury paying 4.5% when inflation is expected at 2.5% gives a real rate of about 2% (1.95%).
A closer look
Gold holds a unique place in economic history. For thousands of years it served as money itself, or as the physical anchor backing paper money. Even today, decades after the gold standard ended, gold remains one of the most important assets in the global financial system.
What the full article covers
In the full article I take you through these sections:
■1.2 Supply and Demand — The Engine Behind Every Price
■1.3 GDP — Measuring the Size of an Economy
■1.4 International Trade — Why Countries Buy and Sell to Each Other
■1.5 Gold — The Timeless Monetary Anchor
It includes worked examples, a look under the hood at the mechanics, a recap, a reveal-on-click quiz and the official sources behind every figure.
Volume I: Global Economy
Read the full article on FinoLib
The complete article, Supply and Demand Curves Explained, Plus GDP, Trade and Gold, with every worked example, diagram, quiz and source, is free to read in Volume I, Global Economy on finolib.com.
Explore the Finance Education Series: Vol. II — Capital Markets · Vol. I — Global Economy · Vol. III — Finance Encyclopedia · Vol. IV — Finance Careers · Vol. V — Personal Finance