Gross domestic product (GDP) has traditionally been used by economists to gauge economic success. If GDP is increasing, the economy is doing well and the country is progressing. On the other side, if GDP declines, the economy may be in jeopardy, and the country may be losing ground. A recession is usually defined by two […]
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Assume that excellent news arrives overnight from abroad, such as a central bank cutting interest rates or a country reporting stronger-than-expected GDP growth. Local equities markets are likely to climb, and investors may expect a higher U.S. market as well. The price of index futures will rise if they buy them. Nobody will be able
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Most people who follow the financial markets are aware that events in Asia and Europe can have an impact on the US market. How many times have you awoken to CNBC or Bloomberg reporting that European markets are down 2%, that futures are pointing to a weaker open, and that markets are trading below fair
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Question from a reader: Why does inflation make it easier for governments to repay their debts? During the 1950s, 1960s, and 1970s, when inflation was quite high, the national debt as a percentage of GDP dropped dramatically. Deflation and massive debt characterized the 1920s and 1930s. Inflation makes it easier for a government to pay
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Governments can fight inflation by imposing wage and price limits, but this can lead to a recession and job losses. Governments can also use a contractionary monetary policy to combat inflation by limiting the money supply in an economy by raising interest rates and lowering bond prices. Another measure used by governments to limit inflation
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Sales taxes and other excise taxes are examples of indirect business taxes that businesses collect but are not counted as part of their profits. As a result, indirect business taxes are included in the income approach to computing GDP rather than the spending approach. Do taxes increase GDP? They discover that income tax cuts, defined
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Milk futures, often known as dairy futures, are a type of agricultural future traded on the CME. The CME has sold several types of milk futures in the past, but it now only provides two: Class III and Class IV. Milk futures and nonfat dry milk futures are available for both classes. What is the
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A futures contract is one way to invest in commodities. A futures contract is a legally binding agreement to acquire or sell a commodity item at a defined price at a future date. Can you trade commodity options? Energy, precious metals, base metals, grain, soft commodities, and animal protein markets all have options available on
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Inversions of yield curves have frequently preceded recessions in recent decades, but they do not cause them. Bond prices, on the other hand, indicate investors’ anticipation that longer-term rates will fall, as they usually do during a recession. Do bonds perform well during a downturn? Bonds can perform well during a recession because investors prefer
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Following a recession, the economy adjusts and recovers some of the gains that were lost during the downturn. When growth accelerates and GDP begins to move toward a new peak, the economy shifts to a real expansion. After a recession, what happens to prices? A drop in pricing is related with a recession. This makes
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