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Big Economic Concepts That Can Affect You

Get the most from the news by understanding some of the basics about the national and global economy.

A stressed man reacting to declining stock market.

Responsible for rising and lowering the cost of essentials such as gasoline, groceries, and housing, changes in the economy and the policies which control it affect you. Most people, however, possess limited knowledge of economics and the terms frequently found in news headlines. Understanding the terms which define the inner workings of the economy will empower you to take control of the way it affects your pocketbook at the polls. By learning a few key terms, you can form your own opinions on politicians and their economic policies.

The Federal Reserve - The Federal Reserve Act signed by Woodrow Wilson established the central bank in 1913. The Federal Reserve Bank's original purpose was to encourage banks to make more commercial loans during times of economic downturn. Today, the Federal Reserve has several branches and a complicated list of responsibilities. The monetary policies it puts into motion directly affect the way you do banking and the cost of credit, provide you with consumer protections, and keep our economic climate at a stable, comfortable temperature.

Inflation - Have you ever wondered why older generations could buy a hamburger for fifteen cents, but it costs you several dollars? Characterized by the average rising cost of everything, inflation decreases the value of each dollar you own. Since the 1930s, inflation has been the norm with costs rising and the economy growing steadily each year.

Unemployment and Underemployment - You often hear the term unemployment in the news. Expressed as a rate, it is one way to assess the health of the economy. This week you will learn how underemployment differs and how these terms affect you. 

Trade Deficit - Another economic topic frequently in the news, trade deficit deals with exports and imports and measures how well the United States and other countries perform with regard to trade. Trade deficits can have a great impact on the economy and the prices you pay for the goods and services you use each day.

Trade Agreements - Made among two or more countries, trade agreements define what these parties consider acceptable practices regarding the import and export of various goods and services between nations. Trade agreements can have a major effect on the economy and the price of goods and services once they reach our store shelves due to potential terms, taxes, and tariffs which all add to the cost of production.

Chinese Imports - Chinese imports include any goods and services which the United States imports from China. In the news, the subject arises most often when discussing our country's trade deficit with China. Some argue that this deficit, money owed to China, puts the nation in a precarious economic and political position. After this week, you will have a more comprehensive understanding of Chinese imports and how they affect our economy and foreign policy.

Basic knowledge of these complex economic concepts and terms will bring much of the economic news into focus, allowing you to form your own opinions on fiscal policy and participate in conversations surrounding these topics with confidence and ease. After this week, you will be familiar with these economic concepts and have a better grasp on how the changing economy can affect you, alter your spending habits, and perhaps even change the way you think about saving for the future.