Macroeconomics
Federal Reserve System - determines monetary policy (influence interest rates) - keep inflation and
unemployment in check
- 12 regional reserve banks
- Federal Reserve Board of Governors
Low-interest rates
- Lowers lending rates
- Makes pending more valuable than saving
- Spurs on investment of capital
- And causes expansion
Quantitative easing - pumping money into the economy (buying securities)
Quantitative Tightening - selling securities (removing money)
Federal Funds Rate - the rate at which banks can borrow money (in order to maintain minimum amount)
Discount Rate - Rate at which banks can borrow money from Fed
Reserve Requirement - Percentage of a Bank’s holding must be kept as reserves
REPO - Repurchase Agreement
LIBOR - London Interbank Offer Rate
- Rate banks from Europe borrow from US
- Process of being phased out
Economic Indicators
- Leading Indicator Peak
- Coincident Indicator Peak
- Lagging Indicator Peak
GDP - Gross Domestic Number
- Most important indicator of economic growth
- Somewhat lagging and not updated often
- Nominal GDP - dollar value of all economics activity
- Real GDP - adjusts for inflation
Nominal GDP - Money Supply * Velocity of Money
Consumer Price Index - Heavily watched by investors but not always accurate or representative
- Heavily doctored by the government
- The lower they claim inflation is the less they have to pay in welfare and the better they seem
politically
Purchasing Managers Index
Unemployment
- Labor Force
- Labor Force Participation Rate
- Unemployment Rate
- Non-Farm Payroll
- Natural Rate of Unemployment
Philips Curve - Represents the relationship between inflation and unemployment
- When inflation is high, unemployment is very high and vice versa
- Stagflation shifts curve to the right
Crude Oil
- Most important commodity
- Watched as a leading indicator of demand
- Price is set by OPEC
Other important Commodities
- Copper
- Lumber, Steel
- Etc.
Foreign Exchange
Retail Sales = Non Durable Goods + Durable Goods
Fiscal Policy - Change in taxes
- Change in government spending
- Contractionary Fiscal Policy almost never seen
Classic Economists - Economy self corrects and government intervention causes unintended
consequences
Keynesian Economists - Government intervention can step in to correct state of the economy
Cost of Goods
- Import Proces
- Commodity Prices
- Wages
- Housing Prices
- Tax Rates
Cost of Money
- Federal Funds Rate
- etc