Financial Impact Of Microeconomics

During the Federal Reserve meeting in April 2016, the range was left unchanged for federal funds at 0.25 percent to 0.5 percent (TRADING ECONOMICS, 2016). Labor markets experience growth confirmed by policy makers, yet economic activity was monitored as being slow (TRADING ECONOMICS, 2016). The risks associated with the financial developments of the country have ceased (TRADING ECONOMICS, 2016). The average percentage of interest rate in the U.S. averaged at 5.8. March of 1980 a record high was recorded at 20% (TRADING ECONOMICS, 2016). The lowest interest rates were recorded in the month of December 2008 at 0.25% (TRADING ECONOMICS, 2016).

During the Federal Reserve meeting in April 2016, the range was left unchanged for federal funds at 0.25 percent to 0.5 percent (TRADING ECONOMICS, 2016). Labor markets experience growth confirmed by policy makers, yet economic activity was monitored as being slow (TRADING ECONOMICS, 2016). The risks associated with the financial developments of the country have ceased (TRADING ECONOMICS, 2016). The average percentage of interest rate in the U.S. averaged at 5.8. March of 1980 a record high was recorded at 20% (TRADING ECONOMICS, 2016). The lowest interest rates were recorded in the month of December 2008 at 0.25% (TRADING ECONOMICS, 2016).

The discussion of whether the Federal Reserve should raise the federal funds rate is a highly contentious one. Members of the Federal Reserve (“Fed”) and academic economists disagree about what constitutes appropriate future macroeconomic policy for the Unites States. In the past, the Fed had been able to raise rates when the unemployment rate was under 5% and inflation was at a target of 2%. Enigmatically, since the Great Recession and despite a strengthening economy, year-over-year total inflation since 2008 has averaged only 1.4%—as measured by the Personal Consumption Expenditures Price Index (“PCE”). Today, PCE inflation is at 1-1.5% and has continuously undershot the Fed’s inflation target of 2% three years in a row. (Evan 2015) In the six years since the bottom of the Great Recession the U.S. economy has made great strides in lowering the published unemployment rate from about 10% back down to about 5.5%. In light of this data, certain individuals believe that the Federal Reserve should move to increase the federal funds rate in 2015 because unemployment is near 5% and inflation should bounce back on its own (Derby 2015). However, this recommendation is misguided.

According to staff review of the financial situation for January 28-29, there are developments in emerging market economies. The Fed will continue to support Monetary economic situations over the intermeeting period, they were critically affected by Federal Reserve correspondences, to some degree better-than-anticipated economic information discharges, and advancements in developing market economies. On net, monetary conditions in the United States stayed strong of development in economic action and work: Equity costs is wrinkled a bit, longer-term investment rates declined, and the

To begin, The Federal Reserve System opted to raise interest rates that were placed near zero years ago in order to aid the economy’s growth and prevent inflation from exceeding the target number. Several factors including: the five percent drop in the unemployment rate, and the increase in wages, and the outlook on future inflation contributed to the Federal Reserve’s decision take this action. However, the increase in interest rates in December has generated mixed results, and it appeared the Federal Reserve would announce the interest rates were going to increase again. Instead, Janet Yellen, the chairman of the Federal Reserve, announced that there were better days ahead for the economy, and a slow and careful approach to future increases in the interest rate would serve the economy best, ensuring the growth is maintained. Although the interest rates remained the same early in 2016, they are expected to increase during the June meeting of the Federal Reserve. but cited the economy needed low interest rates in order for the economy to maintain growth. I find it interesting that Yellen continues to worry about inflation growing in the coming years, although the interest rate increase should keep inflation in check through its effect of the economic markets. Yellen sites that she would like the inflation to become and stay at 2 percent each year. However, the current inflation rate is .9 percent, so the the economy is a long way from achieving its target inflation rate

The Fed has the power to reduce or rise interest rates may have an indirect effect on the dollars’ value, and September 11 effect was one of government indirect intervention that to respond to temporary disturbance. Low interest rates may reduce the amount of foreign flow of funds into the U.S., though it is still hard to predict foreign investors behavior because it is all depends on numbers of

The last five years have shown that traditional monetary policies predicated on interest rate management by the Federal Reserve no longer deliver the economic growth they were once believed to. Keynesian economics has proved to not be as effective as once thought, which has led to the Federal Reserve choose alternative means to stimulate the economy and indirectly manage exchange rates (Hakkio, 1986). The uncertainty over interest rate polices has fortunately not led to increases in inflation, which has typically been the case in the past (Kopcke, 1988). The current economic conditions and the approaches the Federal Research are taking however are cause for concern, and from a personal standpoint many decisions are being evaluated more precisely.

Economics is an enormous field. The term economics is the broader term, however within this, there are additional fields such as microeconomics and macroeconomics. The difference between microeconomics and macroeconomics is analogous to the human body and the individual cell that makes up the human body. Macroeconomics is involved with the wide lens aspect of society. In other words, macroeconomics focuses on the broader large scale economy of a society. Macroeconomics focuses on larger economic issues such as national employment rates, gross domestic product, interest rates, as well as currency exchange rates just to name a few examples. On the other hand, microeconomics focuses more on the narrower lens of an economy. This approach focuses on the individual businesses and customers as far as economic decisions are concerned. Specifically, microeconomics studies the decision making process of the consumer. Microeconomics ask the question, how do consumers spend their money? According to Investopedia (find source), microeconomics is at the heart of consumer purchasing.

This article presents the fundamental reasons behind the Fed’s cautiousness in raising the interest rates, why it is more likely that interest rates will rise in December, and what some possible outcomes of rising interest rates could be.

Over the past year we have gone through many changes politically, environmentally, and more. The main change occurring today is the Federal Reserve’s control on monetary policy which affects the interest rates and money supply all caused by the buying or selling of government bonds. The Federal Reserve needs to raise interest rates because they have “remained relatively slow by historical standards” (Binyamin Appelbaum, July 7, 2017). However, the inflation rate and rate of growth in GDP have been relatively low, restraining the Fed from raising the rates too high.

The first Federal Open Market Committee (FOMC) meeting under Janet Yellen’s leadership brought a much anticipated format change in communication policy, as well as a widely discounted $10bn reduction in monthly asset purchases. There was also abolition of the so-called Evans Rule, which allowed some overshooting of the Fed’s 2% long-term inflation target. Despite the new Fed Chair trying her utmost to portray the policy outlook as dovish, financial markets were not entirely convinced. Altering forward guidance was always going to be the biggest challenge in 2014, particularly given the faster-than-anticipated decline in unemployment. Policy thresholds have been abolished.

The Federal Reserve has set the current interest rate a 0.13, this number is unchanged from the previous week (Board of Governors of the Federal Reserve System, 2015). The current trend for the year 2015 is that the interest rate is beginning to slowly increase (Board of Governors of the Federal Reserve System, 2015). The inflation rate has remained at 0.1 or less for the year 2015, the latest inflation rate was release on June 2015 and was calculated at 0.1 (Coinnews Media Group, 2015). This was the first time in 2015 that the inflation rate has increased. Previous months were either negative or unchanged (Coinnews Media Group, 2015). However, this is an increase from the previous month. The interest rate and inflation are inversely related,

According to the last Federal Reserve press release, the decision to raise the federal funds rate (3/4 to 1 percent) is due to the view of realized and expected labor conditions and inflation. The Federal Open Market Committee’s goal is to foster maximum employment and price stability. Their expectations are that economic activity will expand at a moderate pace, labor market conditions will strengthen a little further, and that inflation will stabilize around 2 percent over the medium term. Near-term risks to the economic outlook seem roughly balanced as well. The FOMC will continue to monitor global economic and financial developments and well as inflation

Microeconomics is the economic influences that impact at the micro, or firm, rather than macro level. The study of this subject is one that is highly valuable for any studying business with the provision of knowledge that will increase understanding of different influences and support the decision making processes. With the knowledge gained, along with the skills in applying that knowledge developed through class work and exercises for the different modules, there has also been the development of increased confidence, both personal and in the theories, in using the relevant concepts and tools in a practical setting.

I have gained much respect for Economics as a field of study during this course. Being a political science major, I can honestly say that there isn’t all that much science in many of the topics. Conversation in political science can be argumentative and normative without concrete reason or evidence. Economics, on the other hand, is intuitive and backed by research. More refreshingly, economics simply puts its research out for the world to see, and sure individual economists may voice their opinions about public policy, but as a field, it is based mainly on positive statements; it tells it like it is without venturing into how it should be. Economists do have a rough job in a way, they can’t simply do research by conducting regular experiments like altering the nation’s monetary supply or increasing the minimum wage to study the effects on unemployment. It is impressive that they find a way to use existing data to draw their conclusions. They really make the most out of what they are given. Additionally, it is nice that assumptions about complex economic topics are made so even students in basic principles courses can understand the concepts in simple economic models.