A recession is defined as two consecutive quarters of negative economic growth, however there are investment strategies that can help safeguard and benefit during downturns. Investors prefer to liquidate riskier holdings and migrate into safer securities, such as government debt, during recessions. Because high-quality companies with long histories tend to weather recessions better, equity investment […]
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The gross domestic product (GDP) is a quarterly economic measure that shows how much production a country produces. In the two months leading up to the release of the final number, the Bureau of Economic Analysis (BEA) in the United States produces two estimates of quarterly GDP, known as advance and preliminary estimates: The advance
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Potential output (also known as “natural gross domestic product”) in economics refers to the highest amount of real gross domestic product (potential output) that may be sustained over time. Actual output occurs in the real world, whereas potential output depicts the highest level that could be reached. What is the formula for calculating natural real
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In 2008, the stock market plummeted. The Dow had one of the most significant point declines in history. Congress passed the Struggling Asset Relief Scheme (TARP) to empower the US Treasury to implement a major rescue program for troubled banks. The goal was to avoid a national and global economic meltdown. What triggered the 2008
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Congress has given the Federal Reserve a dual duty to preserve full employment and price stability in the US economy. During recessions, the Fed uses a variety of monetary policy tools to assist lower unemployment and re-inflate prices. Open market asset purchases, reserve regulation, discount lending, and forward guidance to control market expectations are some
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The Great Recession lasted from December 2007 to June 2009, making it the longest downturn since World War II. The Great Recession was particularly painful in various ways, despite its short duration. From its peak in 2007Q4 to its bottom in 2009Q2, real gross domestic product (GDP) plummeted 4.3 percent, the greatest drop in the
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A lack of company and consumer confidence causes economic recessions. Demand falls when confidence falls. A recession occurs when continuous economic expansion reaches its peak, reverses, and becomes continuous economic contraction. What are the five reasons for a recession? In general, an economy’s expansion and growth cannot persist indefinitely. A complex, interwoven set of circumstances
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Which of the initial markets listed below does not sell futures contracts? B. The NYSE is a stock exchange, not a futures exchange. The CBOT (Chicago Board of Trade), the NYMEX (New York Mercantile Exchange), and the CME (Chicago Mercantile Exchange) are all futures markets that do not trade securities. Which of the first two
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Margin trading requires traders to be alert to market fluctuations, especially with crypto, where margin calls are often. A margin call occurs when a trade goes against the trader, potentially resulting in huge losses based on the leverage ratio. In such instances, the exchange will issue a margin call, giving traders the choice of reducing
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When Inflation Is Beneficial When the economy isn’t operating at full capacity, which means there’s unsold labor or resources, inflation can theoretically assist boost output. More money means higher spending, which corresponds to more aggregated demand. As a result of increased demand, more production is required to supply that need. Why is inflation both beneficial
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