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how do external factors impact economic growth | external factors like global economic conditions international trade and geopolitical events can influence a country s economic growth rates positively or negatively exports for instance can boost growth while global recessions can hinder it | |
what are the potential downsides of high economic growth | high economic growth when not managed sustainably and equitably can lead to environmental degradation resource depletion and social challenges it may also exacerbate income inequality if not accompanied by inclusive policies | |
what is the relationship between inflation and economic growth | moderate inflation can be a sign of a healthy growing economy however high or volatile inflation can erode purchasing power create uncertainty and hinder economic growth by reducing consumer and investor confidence the bottom lineeconomic growth rate measures the percentage change in a country s economy often in gdp ov... | |
what is an economic indicator | an economic indicator is a piece of economic data usually of macroeconomic scale that is used by analysts to interpret current or future investment possibilities these indicators also help to judge the overall health of an economy while there are many different economic indicators specific pieces of data released by th... | |
what is the most important economic indicator | every economist may come up with their own favorite economic indicator for many a country s gdp usually represents the best overall picture of a country s economic health it combines the monetary value of every good and service produced in an economy for a certain period and it considers household consumption governmen... | |
is inflation an economic indicator | yes inflation is a lagging indicator that is reported after a rise in prices has occurred this type of economic indicator is helpful for government agencies to set public policy as without this type of data they would not know the direction of the economy therefore while inflation and other lagging indicators are still... | |
what are the economic indicators of a strong economy | an economy may be strong if it has a robust amount of economic activity and job growth this is measured by low unemployment steady inflation increases to construction positive consumer index readings and increasing gdp | |
do traders use economic indicators | traders and investment professionals may use economic indicators to predict how broad economic policy will impact their trades or investment strategy the bottom lineeconomic indicators are leading coincident or lagging figures that indicate broad conditions economic indicators such as gdp unemployment inflation or cert... | |
what is economic integration | economic integration is an arrangement among nations that typically includes the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies economic integration aims to reduce costs for both consumers and producers and to increase trade between the countries involved in the agreemen... | |
when regional economies agree on integration trade barriers fall and economic and political coordination increases | specialists in this area define seven stages of economic integration a preferential trading area a free trade area a customs union a common market an economic union an economic and monetary union and complete economic integration 2 the final stage represents a total harmonization of fiscal policy and a complete monetar... | |
what are examples of economic integration | there are numerous examples of economic integration around the world in north america the united states mexico canada agreement uscma is an example of a free trade agreement between the three countries the asia pacific economic cooperation is a forum of 21 pacific rim countries aimed at fostering free trade across the ... | |
what are risks of economic integration | economic integration can come with downsides and risks primarily countries participating in regional integration may have divergent priorities when it comes to fiscal and monetary policy resolving such conflicts can be challenging and costly in terms of time and resources in addition economic integration can create a s... | |
what are benefits of economic integration | economic integration can increase trade benefiting both producers consumers and involved countries for instance with the elimination of trade barriers a firm may be able to produce and sell more products earning more revenue and increasing their home country s gross domestic product gdp for customers in other countries... | |
what is economic justice | economic justice is a component of social justice and welfare economics it is a set of moral and ethical principles for building economic institutions where the ultimate goal is to create an opportunity for each person to establish a sufficient material foundation upon which to have a dignified productive and creative ... | |
what is the goal of economic justice | economic justice strives to eliminate the inequality created by capitalism by creating equal opportunities for all members of the economy proponents argue that giving everyone a chance to earn a decent fair income is good for the economy as putting more money in pockets leads to greater spending on goods and services | |
what is the difference between social justice and economic justice | economic justice is about money and making sure everyone has an equal share social justice is concerned with equal rights in general for people of all social dimensions the idea behind social justice is that all people should have equal access to wealth health well being justice privileges and opportunity regardless of... | |
is economic justice achievable | pure economic justice is a rarity many developed economies offer some form of welfare and implement a progressive taxation system to ensure that bigger earners contribute more to public finances however in most of these countries inequality is still widespread loopholes that favor the wealthy undermine attempts to redu... | |
what is economic life | economic life is the expected period of time during which an asset remains useful to the average owner when an asset depreciates to the point it is no longer useful to its owner then it is said to be past its economic life the economic life of an asset could be different than its actual physical life thus an asset can ... | |
what is economic order quantity eoq | economic order quantity eoq is the ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding costs shortage costs and order costs this production scheduling model was developed in 1913 by ford w harris and has been refined over time the economic order quantity for... | |
what economic order quantity eoq can tell you | the goal of the eoq formula is to identify the optimal number of product units to order if achieved a company can minimize its costs for buying delivering and storing units the eoq formula can be modified to determine different production levels or order intervals and corporations with large supply chains and high vari... | |
what is the economic order quantity | economic order quantity is an inventory management technique that helps make efficient inventory management decisions it refers to the optimal amount of inventory a company should purchase in order to meet its demand while minimizing its holding and storage costs one of the important limitations of the economic order q... | |
when is economic order quantity high and low | economic order quantity will be higher if the company s setup costs or product demand increases on the other hand it will be lower if the company s holding costs increase | |
why is economic order quantity important | economic order quantity is important because it helps companies manage their inventory efficiently without inventory management techniques such as these companies will tend to hold too much inventory during periods of low demand while also holding too little inventory during periods of high demand either problem create... | |
what is economic profit | an economic profit is the difference between the revenue received from sales and the explicit costs of producing its goods and services as well as any opportunity costs opportunity costs are a type of implicit cost determined by management and will vary based on different scenarios and perspectives investopedia mira no... | |
what are economic profits | economic profits are the theoretical profits that result when company management subtracts all expenses plus the costs of lost opportunities from revenue earned in a particular period of time | |
why is economic profit important | it can be important because it can help a company s management understand potential flaws in its choices for business strategies or ventures missed financial opportunities and how efficiently it uses company resources | |
what is an opportunity cost | it s the cost to an individual or company of not pursuing a particular business option the cost isn t related to something they spend it refers to money they forego the bottom lineeconomic profit represents a company s revenue less its explicit costs as well as its opportunity costs it s used for internal analysis acco... | |
what is economic profit | an economic profit is the difference between the revenue received from sales and the explicit costs of producing its goods and services as well as any opportunity costs opportunity costs are a type of implicit cost determined by management and will vary based on different scenarios and perspectives investopedia mira no... | |
what are economic profits | economic profits are the theoretical profits that result when company management subtracts all expenses plus the costs of lost opportunities from revenue earned in a particular period of time | |
why is economic profit important | it can be important because it can help a company s management understand potential flaws in its choices for business strategies or ventures missed financial opportunities and how efficiently it uses company resources | |
what is an opportunity cost | it s the cost to an individual or company of not pursuing a particular business option the cost isn t related to something they spend it refers to money they forego the bottom lineeconomic profit represents a company s revenue less its explicit costs as well as its opportunity costs it s used for internal analysis acco... | |
what was the economic recovery tax act of 1981 | the economic recovery tax act of 1981 erta was the largest tax cut in u s history signed by president ronald reagan about six months after he took office erta slashed the top income tax rate and allowed for faster expensing of depreciable assets it included incentives for small business and retirement savings and estab... | |
what is economic rent | economic rent is an amount of money earned that exceeds that which is economically or socially necessary this can occur for example when a buyer working to attain a good or service that is considered exclusive makes an offer prior to hearing what a seller considers an acceptable price market imperfections thus lead to ... | |
what is an economic shock | an economic shock refers to any change to fundamental macroeconomic variables or relationships that has a substantial effect on macroeconomic outcomes and measures of economic performance such as unemployment consumption and inflation shocks are often unpredictable and are usually the result of events thought to be bey... | |
economic stimulus is action by the government to encourage private sector economic activity to stimulate the economy the government adopts targeted expansionary policies | economic stimulus in the united states may be related to monetary policy carried out by the federal reserve other forms of economic stimulus are driven by fiscal policy with lawmakers directing tax policies and government spending toward areas that they believe will jump start the economy policy tools for implementing ... | |
how economic stimulus works | over the course of a normal business cycle governments try to influence the pace and composition of economic growth using various tools at their disposal central governments including the u s federal government use fiscal and monetary policy tools to stimulate growth state and local governments can also engage in proje... | |
how is the economy stimulated | the government can stimulate the economy through targeted expansionary monetary and fiscal policy the idea of economic stimulus is that these actions by the government help to jump start economic activity in the private sector policy tools for stimulating the economy include interest rate cuts government spending incre... | |
is stimulus good for the economy | economists continue to debate the usefulness of economic stimulus programs while stimulus efforts often have short term benefits of boosting demand and reinvigorating vital economic sectors the longer term effects can be more difficult to quantify for instance an overstimulated economy could have the unintended consequ... | |
when central banks like the u s federal reserve opt to engage in quantitative easing they buy securities from the market to increase the money supply this means that banks have more reserves on hand and the increased liquidity revitalizes lending and investing | the bottom lineeconomic stimulus can refer to monetary and fiscal policies that governments put in place to energize economic activity in the private sector policymakers aim stimulus efforts at critical areas of the economy with hopes that the multiplier effect will provoke broader economic growth there is still plenty... | |
what is economic value | economic value is the value that person places on an economic good based on the benefit that they derive from the good it is often estimated based on the person s willingness to pay for the good typically measured in units of currency the economic value should not be confused with market value which is the market price... | |
what is economic value added eva | economic value added eva is a measure of a company s financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit adjusted for taxes on a cash basis eva can also be referred to as economic profit as it attempts to capture the true economic profit of a company ... | |
where | special considerationsthe equation for eva shows that there are three key components to a company s eva nopat the amount of capital invested and the wacc nopat can be calculated manually but is normally listed in a public company s financials capital invested is the amount of money used to fund a company or a specific ... | |
what is the economic value of equity eve | the economic value of equity eve is a cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows unlike earnings at risk and value at risk var a bank uses the economic value of equity to manage its assets and liabilities this is a long term eco... | |
what is economics | economics is a social science that focuses on the production distribution and consumption of goods and services the study of economics is primarily concerned with analyzing the choices that individuals businesses governments and nations make to allocate limited resources economics has ramifications on a wide range of o... | |
what is the role of an economist | an economist studies the relationship between a society s resources and its production or output and their opinions help shape economic policies related to interest rates tax laws employment programs international trade agreements and corporate strategies economists analyze economic indicators such as gross domestic pr... | |
what are economic indicators | economic indicators detail a country s economic performance published periodically by governmental agencies or private organizations economic indicators often have a considerable effect on stocks employment and international markets they may predict future economic conditions that will move markets and guide investment... | |
what is a command economy | a command economy is an economy in which production investment prices and incomes are determined centrally by a government a communist society has a command economy | |
what is behavioral economics | behavioral economics combines psychology judgment decision making and economics to understand human behavior branches of economic thought continue to grow and change one such example is the progressive branch of bioeconomics that models economic decisions in terms of managing resources who has influenced the study of e... | |
what are economies of scale | economies of scale are cost advantages reaped by companies when production becomes efficient companies can achieve economies of scale by increasing production and lowering costs this happens because costs are spread over a larger number of goods costs can be both fixed and variable investopedia mira norianunderstanding... | |
what are economies of scale | economies of scale are the advantages that can sometimes occur as a result of increasing the size of a business for example a business might enjoy an economy of scale in its bulk purchasing by buying a large number of products at once it could negotiate a lower price per unit than its competitors | |
what causes economies of scale | generally speaking economies of scale can be achieved in two ways first a company can realize internal economies of scale by reorganizing the way their resources such as equipment and personnel are distributed and used within the company second a company can realize external economies of scale by growing in size relati... | |
why are economies of scale important | economies of scale are important because they can help provide businesses with a competitive advantage in their industry companies will therefore try to realize economies of scale wherever possible just as investors will try to identify economies of scale when selecting investments | |
when do diseconomies of scale occur | diseconomies of scale can occur when companies fumble their expansion plans they may ramp up production but their costs per unit increase rather than decrease they may have hired too many managers or opened too many locations they may have failed to buy the right equipment or hire the right workers in such cases they m... | |
what are economies of scope | an economy of scope means that the production of one good reduces the cost of producing another related good economies of scope occur when producing a wider variety of goods or services in tandem is more cost effective for a firm than producing less of a variety or producing each good independently in such a case the l... | |
what is an economist | an economist is an expert who studies the relationship between a society s resources and its production or output economists study societies ranging from small local communities to entire nations and even the global economy the expert opinions and research findings of an economist are used to help shape a wide variety ... | |
what is an economy | an economy is a complex system of interrelated production consumption and exchange activities which ultimately determine how resources are allocated among participants the production consumption and distribution of goods and services combine to fulfill the needs of those living and operating within the economy an econo... | |
what is economics | economics is a branch of the sciences that seeks to understand the way a population functions by studying the way its economy functions every group of people develops a survival plan based on shared labor and resources how they do that and how well they succeed at it is central focus of the study of economics | |
what is macroeconomics vs microeconomics | macroeconomics is the study of the overall performance of an economy it evaluates the stability and progress of an economy over time by analysis of key indicators these include gdp employment inflation or deflation and the balance of trade microeconomics is the study of the behavior of the individual consumers and busi... | |
what is economics in real life | all of us participate in economies we contribute something to the whole by producing or helping to produce a product or offering a service in return we receive money that allows us to buy the goods and services that we can t produce for ourselves the bottom linean economy is system of production and consumption activit... | |
what is edtech | edtech a combination of education and technology refers to hardware and software designed to enhance teacher led learning in classrooms and improve students education outcomes edtech is still in the early stages of its development but it shows promise as a method of customizing a curriculum for a student s ability leve... | |
what is an education loan | an education loan is a sum of money borrowed to finance post secondary education or higher education related expenses education loans are intended to cover the cost of tuition books and supplies and living expenses while the borrower is in the process of pursuing a degree payments are often deferred while students are ... | |
how an education loan works | education loans are issued for the purpose of attending an accredited college or a university to pursue an academic degree education loans can be obtained from the government or through private sector lending sources federal loans often offer lower interest rates and some also offer subsidized interest meaning the unit... | |
what type of debt are student loans | student loans are considered unsecured installment debts meaning there isn t a physical asset tied to them and they re paid back in a set number of installments over an agreed upon period of time 7 | |
what are the four major types of educational loans | there are four types of federal student loans available as part of the william d ford federal direct loan program 89 | |
what are three effective techniques for managing student loan debt | there are several ways to better manage student debt three particularly useful strategies include paying off loans with the highest interest rates first paying down extra principal whenever possible and exploring operations for debt forgiveness | |
what is an education ira | an education ira is a tax advantaged investment account for higher education now more formally known as a coverdell education savings account esa under this educational savings vehicle parents and guardians are allowed to make nondeductible contributions to an education individual retirement account ira for a child und... | |
what is an effective annual interest rate | an effective annual interest rate is the real return on a savings account or any interest paying investment when the effects of compounding over time are taken into account it also reflects the real percentage rate owed in interest on a loan a credit card or any other debt it is also called the effective interest rate ... | |
what the effective annual interest rate tells you | a certificate of deposit cd a savings account or a loan offer may be advertised with its nominal interest rate and effective annual interest rate the nominal interest rate does not reflect the effects of compounding interest or even the fees that come with these financial products the effective annual interest rate is ... | |
how do you calculate the effective annual interest rate | the effective annual interest rate is calculated using the following formula effective annual interest rate 1 in n 1where i nominal interest raten number of periods begin aligned effective annual interest rate left 1 frac i n right n 1 textbf where i text nominal interest rate n text number of periods end aligned effec... | |
what is the purpose of effective annual interest rates | the purpose of the effective annual interest rate is to make interest rates comparable regardless of their compounding periods investors savers or borrowers can take nominal rates with different compounding periods e g one that compounds weekly one that compounds monthly to see which will be most beneficial to them | |
what is a nominal interest rate | a nominal interest rate does not consider any fees or compounding of interest it is often the rate stated by financial institutions | |
is it better to have a higher ear | it is better for savers investors to have a higher ear though it is worse for borrowers to have a higher ear in either situation the ear will likely be higher than the nominal rate it may be more strategic to understand how the ear has changed in recent history and what future trends look like when evaluating future tr... | |
what is effective date | in contract law the effective date is the date that an agreement or transaction between or among signatories becomes binding for an initial public offering ipo it is the date when shares can first be traded on an exchange both parties to a contract usually need to agree on an effective date before a contract is signed ... | |
what is effective duration | effective duration is a duration calculation for bonds that have embedded options this measure of duration takes into account the fact that expected cash flows will fluctuate as interest rates change and is therefore a measure of risk effective duration can be estimated using modified duration if a bond with embedded o... | |
what is effective gross income | effective gross income egi is the potential gross rental income plus other income minus vacancy and credit costs of a rental property egi can be calculated by taking the potential gross income from an investment property add other forms of income generated by that property and subtract vacancy and collection losses und... | |
what constitutes other income generated from rental properties here are some of the most common sources of cash flow not derived directly from rental payments | in real life a unit will not always be rented for the entire year vacancy costs are the periods between tenants where the owner is not receiving rent because there is a vacancy vacancy costs are forecasts of how long the owner believes his unit will be without a tenant if the owner has managed investment properties for... | |
why egi is important | egi is essential to the real estate investor because at the end of the day they need to know that the property they are considering purchasing generates enough positive cash flow to cover monthly operating expenses as well as any liens or encumbrances they may have taken on to purchase the property | |
what is the effective tax rate | the term effective tax rate refers to the percent of income that an individual or corporation owes pays in taxes the effective tax rate for individuals is the average rate at which their earned income such as wages and unearned income such as stock dividends are taxed the effective tax rate for a corporation is the ave... | |
how to calculate the effective tax rate | the effective tax rates for individuals and corporations look like this when they re expressed as formulas so if you want to calculate your effective tax rate here s how you do it | |
how the effective tax rate works | as noted above the effective tax rate is the average tax rate of a taxpaying entity this includes both individual taxpayers and corporations the effective tax rate is expressed as a percentage the effective tax rate typically refers only to federal income taxes and doesn t take into account any other types of taxes inc... | |
how do i calculate my effective tax rate | you can easily calculate your effective tax rate as an individual taxpayer do this by dividing your total tax by your taxable income to get the rate multiply by 100 you can find your total tax on line 24 of form 1040 and your taxable income on line 15 of the form | |
what s the difference between the effective and marginal tax rate | an effective tax rate is the average tax rate for an individual or corporate taxpayer as such it s the percentage of taxes owed from the taxpayer s annual income a marginal tax rate on the other hand is the total amount of tax levied on different levels of income this means that a taxpayer s tax rate gets higher as the... | |
which is lower the effective tax rate or the marginal tax rate | an individual s effective tax rate is lower than the marginal rate that s because the marginal tax rate breaks up your income into different levels the first level of income incurs a lower tax rate while higher levels of income are taxed at the highest rate any amounts that fall in between are charged taxes based on le... | |
what is the effective yield | the effective yield is the return on a bond that has its interest payments or coupons reinvested at the same rate by the bondholder effective yield is the total yield an investor receives in contrast to the nominal yield which is the stated interest rate of the bond s coupon effective yield takes into account the power... | |
where | following our initial example presented above the investor s effective yield on his 5 coupon bond will be note that since the bond pays interest semi annually payments will be made twice to the bondholder per year hence the number of payments per year is two from the calculation above the effective yield of 5 06 is cle... | |
what is efficiency | the term efficiency refers to the peak level of performance that uses the least amount of inputs to achieve the highest amount of output efficiency requires reducing the number of unnecessary resources used to produce a given output including personal time and energy efficiency is a measurable concept that can be deter... | |
how do you calculate efficiency | efficiency can be expressed as a ratio by using the following formula output input output or work output is the total amount of useful work completed without accounting for any waste and spoilage you can also express efficiency as a percentage by multiplying the ratio by 100 | |
what is allocative efficiency | allocative efficiency occurs in an efficient market this is where capital is allocated in the best way possible to benefit each party involved it allows for the even distribution of goods and services financial services and other key elements to consumers businesses and other entities so they can be used in the best wa... | |
what is peak efficiency | peak energy is the highest level of efficiency you can reach this kind of efficiency occurs when all capital resources and individual participants are properly allocated and fully functional to the best of their ability for instance peak economic efficiency occurs when the economy is productive and the standard of livi... | |
what is energy efficiency | energy efficiency occurs when you use less energy to achieve the same result being energy efficient reduces energy waste and greenhouse gases as well energy demand it also helps cut down on bills and overall costs using new and more efficient ways to consume energy for example consumers can purchase energy efficient ap... | |
what is a measure of efficiency in an investments | an investment s measure of efficiency is its return on investment this is the way investors and financial professionals measure how efficiently an investment makes a profit this metric can also be used to compare one investment to another or multiple investments in a particular class such as mutual funds that invest in... | |
when you re efficient it means that you re able to achieve your goals with as little money and effort as possible without producing too much waste essentially you use very little to get the biggest result possible | efficiency is important for businesses and individuals alike businesses that run efficiently can reduce their costs and improve their bottom lines similarly consumers who make choices to become more efficient such as choosing energy efficient appliances or investments that have the best possible returns while serving t... | |
what is the efficiency ratio | the efficiency ratio is typically used to analyze how well a company uses its assets and liabilities internally an efficiency ratio can calculate the turnover of receivables the repayment of liabilities the quantity and usage of equity and the general use of inventory and machinery this ratio can also be used to track ... | |
what does the efficiency ratio tell you | efficiency ratios also known as activity ratios are used by analysts to measure the performance of a company s short term or current performance all of these ratios use numbers in a company s current assets or current liabilities quantifying the operations of the business an efficiency ratio measures a company s abilit... | |
what does an efficiency ratio measure | an efficiency ratio measures a company s ability to use its assets to generate income it often looks at various aspects of the company such as the time it takes to collect cash from customers or to convert inventory to cash an improvement in efficiency ratio usually translates to improved profitability | |
what does the efficiency ratio mean in banking | an efficiency ratio has a specific meaning for banks it is referred to as non interest expenses revenue and shows how well bank managers control their overhead or back office expenses | |
how do analysts use efficiency ratios | analysts use efficiency ratios to measure the performance of a business s short term or current performance all of these ratios use numbers in a firm s current assets or current liabilities quantifying the operations of the business the bottom linethe efficiency ratio typically analyzes how well a company uses its asse... | |
what is the efficient frontier | the efficient frontier is the set of optimal portfolios that offer the highest expected return for a defined level of risk or the lowest risk for a given level of expected return portfolios that lie below the efficient frontier are sub optimal because they do not provide enough return for the level of risk portfolios t... | |
why is the efficient frontier important | the curvature of the efficient frontier graphically shows the benefit of diversification and how this can improve a portfolio s risk versus reward profile | |
what is the optimal portfolio | an optimal portfolio is one designed with a perfect balance of risk and return the optimal portfolio looks to balance securities that offer the greatest possible returns with acceptable risk or the securities with the lowest risk given a certain return |
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