The_Economy_&_Personal_Banking[1]-1

The_Economy_&_Personal_Banking[1]-1 - The Economy &...

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The Economy & Personal Banking
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Economy The economy is judged primarily by the following three indicators: 1. Unemployment Rate - Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. 2. Gross Domestic Product - the output of goods and services produced by labor and property located in the United States 3. CPI (Consumer Price Index) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
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Unemployment Rate Percentage Month / Year Percent
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Quarterly Change for Gross Domestic Product http://www.bea.gov/newsreleases/national/gdp/gdp_glance.htm The downturn in GDP reflects a broad contraction in consumer spending, notably in food, clothing and household items.
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CPI The CPI is the most widely used measure of inflation and is sometimes viewed as an indicator of the effectiveness of government economic policy. It provides information about price changes in the Nation's economy to government, business, labor, and private citizens and is used by them as a guide to making economic decisions. In addition, the President, Congress, and the Federal Reserve Board use trends in the CPI to aid in formulating fiscal and monetary policies. The CPI is often used to adjust consumers' income payments (for example, Social Security) to adjust income eligibility levels for government assistance and to automatically provide cost-of-living wage adjustments to millions of American workers. As a result of statutory action the CPI affects the income of millions of Americans. Over 50 million Social Security beneficiaries, and military and Federal Civil Service retirees, have cost-of-living adjustments tied to the CPI. In addition, eligibility criteria for millions of food stamp recipients, and children who eat lunch at school, are affected by changes in the CPI. Many collective bargaining agreements also tie wage increases to the CPI. http://www.bls.gov/cpi/cpiadd.htm#2_1
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http://www.bls.gov/data/inflation_calculator.htm This chart tells us that the buying power of $10 in 1983 would be worth $21.74 in 2008. Annual CPI Percentage Year Percent
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Why is that important? If you just keep your money at your house and earn no interest, it would in essence be worth ½ as much. What you could buy for $10 in 1983 would cost you $21 today. How can you earn enough to compensate for the CPI adjustment and/or more? Time Value of Money
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Economic Cycles Economic cycles, sometimes referred to as business cycles, are the fluctuations in economic activity that occur in any developed market economy. Theoretically, any deviation from average growth is considered an economic cycle, whether growth of GDP, household income, employment rates, etc. In practice, economic cycles are divided into two main categories: booms and recessions . Booms are associated with a strong economy, while recessions are characterized by below-trend economic growth. The National
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This note was uploaded on 04/09/2012 for the course BUSINESS LU124475 taught by Professor Prof.johns during the Spring '09 term at Liberty.

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The_Economy_&_Personal_Banking[1]-1 - The Economy &...

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