4th Quarter Growth Revised Up (03/29)
" Economic growth was moderately stronger in the fourth quarter than previously thought, primarily because businesses added more to inventories than was estimated a month ago…” Note that GDP reflects the final value of all output in the U.S. economy, regardless of whether it was sold or placed in inventory. Discuss how goods that were not sold but ended up on stockroom shelves are included in the revised 4 th quarter GDP report (Final GDP). Examine how the current GDP measures up against the past years (What was the GDP then?). Discuss why aggregate gains in GDP may not translate into individual income gains (Inequality Analysis).
Circuit City Plans To Fire 3,400 Employees (03/28)
" The consumer electronics retailer announced Wednesday that it was immediately firing store associates who were paid well above the market-based salary range for their role." Review the basic goal of a firm is to maximize its profit. Discuss how this assumption of profit maximization serves well in explaining the firm’s behavior, in this case Circuit City, in its market (Press Release). Examine 2006 Circuit City financial statements and assess how replacing 3,400 “who were paid well above the market-based range” with new employees with lower salaries affect the firm’s bottom line (Statements).
No Change To Fed Funds Rate (03/21)
" The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.” Review the FOMC statement. Discuss what may be the next move for the Federal Reserve (Analysis). See how top economic forecasters are making their calls (Forecasts). Examine what option markets expect the most likely outcome of upcoming FOMC meetings will be (Outcomes). Discuss how the federal funds rate affects economic activities (Affects).
Surging Corn Prices Tighten Ethanol Financing (03/21)
" Financing for ethanol plants has tightened as rising corn prices have made it tougher for producers to turn a profit and an industry shake-out could follow, according to sector bankers and executives.” Examine how ethanol production or supply in the U.S. has increased (Production) in response to rising gasoline prices during the past few years (Gasoline Prices). Discuss how rising corn or input prices may make it difficult for ethanol production firms to turn a profit particularly when gasoline prices are falling (Analysis).
Consumer Prices Rise (03/16)
" The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in February, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today . ” Review the Consumer Price Index Summary information. Discuss why CPI is carefully dissected each month by the financial markets (News). Why most economists see “core-CPI” as the best measure of the underlying inflation rate in the economy (Core-CPI Data)? Survey other economic indicators which help to gauges of inflation (PPI, GDP Price Index and PCE) and discuss their relative strengths and weakness.
New Century Mortgage Suspended By NYSE (03/13)
" New Century Financial Corporation, a mortgage real estate investment trust (REIT), today announced that the New York Stock Exchange has determined that its common stock… (is) no longer suitable for continued listing on the NYSE and will be suspended immediately.” Examine how loose lending policies and high home prices may have triggered an explosion in “subprime” loans to people with shaky credit (News). Discuss how the slowdown in housing market and the concurrent falling home prices (Data) may affect the economy (News).
Solid Job Growth But Many Are Remain Nervous (03/09)
" Nonfarm payroll employment continued to trend up (+97,000), and the unemployment rate (4.5 percent) was essentially unchanged in February, the Bureauof Labor Statistics of the U.S. Department of Labor reported today.” Review the latest Employment Situation Summary report and assess the current employment situation (Trend). Examine if there are signs of “the slowing aspects of the current economy are feeding into the job market” (Analysis). Discuss why the official unemployment rate may not provide clear signs of the employment situation (Signs).
Vonage Infringed Verizon’s Patents (03/08)
" Jurors in a patent infringement case before the U.S. District Court for the Virginia Eastern District Thursday (March 8) ruled that VoIP service provider Vonage Holdings Corp. infringed three U.S. patents held by Verizon. ” Discuss why providing patent protection is important for fostering innovation in the economy (Patent Law). What relationship, if any, may exist between innovation and economic growth in the long run (Patents)? Review some interesting patents from the past that may have helped to transform the economy (Past Patents).
Bernanke: Globalization May Boost Inflation (03/03)
"There seems to be little basis for concluding that globalization overall has significantly reduced inflation in the United States in recent years," Bernanke said. "Indeed, the opposite may be true." Discuss how recent increases in energy and commodity use in developing countries such as China and India may have pushed up global commodity prices (Prices). Examine if there is any historical relationship between commodity prices and inflation (Chart). Assess how globalization may have affected inflation (Affects) and the efficacy of U.S. monetary policy (Policy).
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