Value of the dollar.
What was the "value of a dollar" in 1959? How does this value compare with the value of a dollar in 1979? in 2009? What are the most important concepts to keep in mind about the measurement and calculations which go into the generation of numbers which measure the "value of a dollar"?
Current economic conditions in the U.S.
Consider the following macroeconomic data for the U.S. The the nationwide
U.S. unemployment rate for September 2014 was 5.9%, down from 6.1% in August 2014, and down from 7.2% in September 2013. The 12month change in the Consumer Price Index shows the inflation rate at 1.7% for August 2014; the oneyear inflation rate in August 2013 was at 1.5%. For the last four years, figures for the average hourly earnings of all employees have increased by approximately 2 percent each year. Labor productivity increased by 0.9% in 2013, and by about 1.0% in 2012. {Source: bls.gov} The real GDP growth rate for the second quarter of 2014 was +4.6%, but for the first quarter of 2014 was 2.1% ; for all of 2013, the annual real GDP growth rate was approximately +3.0%.
Where is the U.S. economy in the business cycle? Explain.
Equity prices and interest rates.
In general, equity prices such as indexes of stock prices like the Standard & Poors 500 or the Dow Jones Industrial Average, increase when interest rates are decreasing. Explain why. How can an investor determine whether the price of equities is rising due to monetary & financial factors such as the decline of interest rates or for other reasons? Is this distinction important to the investor? Explain.
Behavioral concepts in banking and finance.
Define and explain the economic behavioral concepts of "adverse selection" and "moral hazard." How are these important to the modern understanding of how banking and financial institutions function? How do these concepts change the way economists might view the functioning of the market process of financial intermediation and what conclusions we might derive about the efficiency and effectiveness in the operating of of financial and capital markets?