This Presidential
election is over. Now take time to understand these financial terms as you listen to the politicians talk about spending your tax money.As you will notice when you click on the link for Our Public Debt, this nation is in a dangerous economic position. If this doesn’t cause you to be both afraid and angry, I don’t know what could.
Any politician,
Democrat or Republican, who tell you that they are going to give you something
for free and don’t tell you how they are going to cut Waste, Fraud, and Abuse; or, don't tell you how their policies are going to grow our
economy, build businesses, and create jobs need to be shunned like the plague.
Here are the 22 Financial Terms:
1. Fiscal Policy
The existing policy the
government has for spending and taxing. Government financial practices that
influence and direct the overall economy. The Congress is responsible for
developing our government’s fiscal policy. When the economic plan is passed through the Congress and signed by the Presidential, it will become the
fiscal policy for that particular fiscal year.
2. Monetary Policy
The Federal Reserve
actions are designed to influence the availability and cost of money. Specific
policy includes changing the
discount rate, altering bank reserve requirements, and open market operations.
3. Federal Reserve
System
The independent central
bank that influences to supply of money and credit in the United States through
his control of bank reserves. Neither the Congress nor the President controls
the central bank.
4. Rule of 72
The mathematical rule
used in approximating the number of years it would take a given investment to
double in value. The number of years to double an investment is calculated by
dividing 72 by the annual rate of return.
5. Gross National Product
(GNP)
The sum of the gross
domestic product and the international income earned by US residents minus the
US income of people living in other countries
6. Inflation
A general increase in
the price level of goods and services which drives a decline in purchasing
power. The current inflation rate is 2.2%. Go to U.S. Inflation Rate to keep up with the changes.
7. Gross Domestic Product
(GDP)
The entire market value
of goods and services produced in a country for a specific time (usually one
year).
8. Consumer Price Index
A benchmark number that
tracks the change in a select collection of normal household expenditures, such
as food, electricity, housing, and transportation. Measures changes in the cost
of living. A measure of the relative cost of living compared with a base
period.
9. Cost-of-Living Adjustments
(COLA)
A yearly modification
of Social Security payments and wages based on changes in the consumer price
index. Meant to help defray declines in consumer purchasing power. Although the ex-President Obama advocated for federal workers getting a COLA, he was as silent as a church mouse when it came to advocating for senior citizens.
10. Recession
A sustained period of
relative decline, defined by a drop in national gross domestic (GDP) product that
lasts for at least six months. The National Bureau of Economic Research
formally defines a recession as three consecutive quarters of falling real
gross domestic product.
11. Dow Jones Average
A trademark for an
index of the relative prices of selected industrial, transportation, and utility
stocks based on a formula developed and periodically revised by Dow Jones and
Company Inc. The Average is calculated by adding the share prices of 30 large,
seasoned industrial firms such as IBM, Exxon, AT&T, Westinghouse, and GM
and dividing the sum by a figure that is adjusted for such things as stock
splits and substitutions.
12. Federal Open Market
Committee
A policy- making
committee within the Federal Reserve that has the responsibility for
establishing and carrying out open- market operations.
13. Open Market Operations
The purchase and sale
of government securities from a primary dealer in the open market by the
Federal Reserve in order to influence the money supply, credit conditions, and
interest rates. For example, large purchases of securities will release funds
into bank reserves which, in turn, would be used for lending. This action
increases the supply of money, and, at least temporarily, pushes down interest
rates. Open market operations have significant effects on security prices.
14. Weak Dollar
A dollar that is of
smaller value relative to foreign currencies. A weak dollar hurts consumers of
foreign goods because these goods cost more in terms of US dollars.
15. Strong Dollar
A dollar that is
valuable relative to foreign currencies. A strong dollar tends to hurt US firms
that rely heavily on foreign sales because of the firm’s products will cost
more in terms of foreign currencies.
16. Capitalism
An economic system,
characterized by open competition in a free market, in which the means of
production and distribution are privately or corporately owned and development
is proportionate to increasing accumulation and reinvestment of profits.
17. Socialism
An economic and
political system where most property is publicly, not privately, owned. During
this the last Presidential election cycle, Bernie Sanders declared himself to be a
Socialist. Economists call Socialism a command, or planned economy because it
is necessary for large government bureaucracies to command, or plan resource
allocation. Under Socialism there is no market in the sense that prices are set
by the government.
18. National Debt
The debt is the total
amount the government owes. To know what the current debt is, go to the National
Debt website.
19. National Deficit
The deficit is the
amount by which expenditures exceed revenues during one fiscal year – – the
year covered by the annual budget. The know what the currently projected
national deficit is, go to the National Deficit Website.
20. Depression
A substantial,
prolonged economic decline.
21. Microeconomics
A little-picture view
of small pieces of the economy, such as individual people or companies, to see
how and why they participate in the economy. Looks at factors such as who makes
purchase decisions and price-setting of specific products.
22. Macroeconomics
The study of the
economy as a whole, a big picture view. Focuses on national factors, such as
federal interest rates and gross domestic product.
There it is the 22 Financial Terms you should know. Bookmark this site and regularly refer back to it.
Leave you comments below. I'd like to hear from you.
There it is the 22 Financial Terms you should know. Bookmark this site and regularly refer back to it.
Leave you comments below. I'd like to hear from you.