mod 1, lec 1 - Chapter 1 Inflation preferable low(but not negatives 2.1 occurs when prices of goods in economy increases Ex Japan facing deflation rates

mod 1, lec 1 - Chapter 1 Inflation preferable low(but not...

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Chapter 1 Inflation : preferable low (but not negatives), 2.1%, occurs when prices of goods in economy increases Ex: Japan facing deflation rates, consumers waiting to make purchases due to lowering prices, negatively impacting economy Stability : condition in which the amount of money available in an economic system and the quantity of goods and services produced in it are growing at about the same rate Consumer Price Index: measure of prices of typical products purchased by consumers living in urban Bond Rate : charge government pays to borrow, 2.47% (10 year)-- relatively low, Trump proposes to spend more without significantly increasing taxes Economic Growth : 3-4% annual over last few decades (US) Unemployment Rates : 4.7%, level of joblessness among people actively seeking work in an economy If wage rates are too high, businesses will respond by hiring fewer workers Businesses could raise prices to counter increased labor costs, but they won’t be able to sell as many of their products at higher prices, reduced sales so cut back on hiring Equity Market averages : stock prices of existing companies and averaging to understand average stock price, affected by future earnings/ cash flow + traders’ perception of risks in the market, currently is close to all time highs Dow 30- most discussed S&P 500- most broad based (best average) Nasdaq- emphasizing tech and industrial Use accounting, finance, and financial statement analysis to do personal research of individual companies (also consider debt markets- may have outsize effect on some industries, such as real estate-- bond rate goes up, mortgage rate goes up, house prices go down) Types of Economy 1. Planned- centralized government controls all or most factors of production and to make production and allocation decisions, Ex: North Korea a. Communism- political system in which the government owns and operates all factors of production b. Governments converting from planned to mixed may emplot market mechanisms through privatization (process of converting government enterprises into privately owned companies) 2. Mixed Market Economy (compromise) - US, no agency determining how many units are produced (supply and demand not regulated by government) a. Socialism- partially planned economic system in which the government owns and operates only selected major sources of production 3. Market Economy- individual producers and consumers control production and allocation by balancing supply and demand mediated by price a. Rely on capitalism and free enterprise to create environment where producers and consumers are free to sell and buy what they choose (within certain limits) b. Capitalism- system that sanctions the private ownership of the factors of production and
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  • Spring '08
  • XuanmingSu

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