Gibson's Paradox

Dictionary Says

Definition of 'Gibson's Paradox'

An economic observation made by J. M. Keynes during the period of the gold standard that there is a correlation between interest rates and the general price level. Keynes' finding, which he discusses in "A Treatise on Money" (1930), is a paradox because it is contrary to the view generally held by economists at the time, which was that interest rates were correlated to the rate of inflation.
Investopedia Says

Investopedia explains 'Gibson's Paradox'

In Keynes' research, interest rates were highly correlated to wholesale prices but had little correlation to the rate of inflation. In this paradox, interest rate movements are connected to the level of prices, not the rate of change in prices.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Economics

    A social science ...
  2. Fiat Money

    Currency that a ...
  3. Gold Standard

    A monetary ...
  4. Inflation

    The rate at ...
  5. Interest Rate

    The amount ...
  6. Keynesian Economics

    An economic ...
  7. Correlation

    In the world of ...
  8. Push On A String

    When monetary ...
  9. Expansion

    The phase of the ...
  10. Demographic Dividend

    The freeing up ...

Articles Of Interest

  1. Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. What Is Money?

    It's a part of everyone's life, and we all want it, but do you know how it gains value and how it is created?
  3. Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  4. Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  5. The Consumer Price Index: A Friend To Investors

    As a measure of inflation, this index can help you make key financial decisions.
  6. A Primer On Reserve Currencies

    For nearly a century, the U.S. dollar has served as the world's premier reserve currency, but the future is uncertain.
  7. Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.
  8. Okun's Law: Economic Growth And Unemployment

    Learn about Okun's Law, why it is important and how it stood the test of time since first being published.
  9. How Debt Limits A Country's Options

    While debt is fundamentally necessary to the operation of a national government, it can also be limiting and dangerous.
  10. The Link Between The Fed, Money, Debt And Taxes

    Assets on the Fed's balance sheet, money supply level, national debt level and economic production should be maintained in equilibrium.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center