During recessions, the principal risk faced by corporate bonds is credit risk. Due to the current economic climate, some businesses may be forced to close their doors, and bondholders may lose their principal investment. During recessions, however, interest rate risk is less likely to endanger corporate bonds. During recessions, interest rates are normally low, thus […]
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Inflation tends to drive up housing costs. The price of commodities remains constant in the absence of economic and supply-and-demand factors. The price of things will rise if the only change made to the economy is the addition of money. Of course, the economy is ever-changing; nothing is constant. And there are a slew of
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Looking for a positive spin on January’s dismal inflation report? Take a look at what’s going on with automobiles. New-car costs have risen 12.2 percent in the last year as manufacturers struggle to keep up with strong consumer demand due to supply-chain interruptions and other challenges. The price of a used car has increased by
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Any asset or income stream denominated in money is susceptible to inflationary risk because its value declines in direct proportion to the declining purchasing power of money. The classic example of an asset vulnerable to inflationary risk is lending a fixed quantity of money for later repayment, because the money repaid may be worth much
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The debt-to-GDP ratio is a formula that compares the overall debt of a country to its economic production. Divide a country’s debt by its gross domestic product to get the debt-to-GDP ratio. Investors are more willing to invest when a country’s debt-to-GDP ratio is manageable, and it doesn’t have to give as high a yield
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A recession is defined as a slowdown or a significant contraction in economic activity. A recession is usually preceded by a major drop in consumer expenditure. This type of downturn in economic activity can endure for several quarters, thereby halting an economy’s expansion. Economic metrics such as GDP, business earnings, employment, and so on collapse
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Inflation can drive up a company’s costs while lowering its pricing power. What effect does inflation have on technology stocks? When inflation is high, technology equities have typically underperformed. In the past, inflation has had a greater impact on the performance of technology stocks than the state of the economy. Following periods of high corporate
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Inflation is and has been a contentious topic in economics. Even the term “inflation” has diverse connotations depending on the situation. Many economists, businesspeople, and politicians believe that mild inflation is necessary to stimulate consumer spending, presuming that higher levels of expenditure are necessary for economic progress. How Can Inflation Be Good For The Economy?
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Retail and wholesale trade industries led the increase in private inventory investment. The largest contributor to retail was inventory investment by automobile dealers. Increases in both products and services contributed to the increase in exports. Consumer products, industrial supplies and materials, and foods, feeds, and beverages were the biggest contributions to the growth in goods
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If unemployment was 6% and it was reduced to 5% through monetary and fiscal stimulation, the impact on inflation would be modest. In other words, a 1% decrease in unemployment would not result in a significant increase in pricing. When inflation rises, why does unemployment fall? If the economy overheats, or if the rate of
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