Partha's Econ Blog

For the last few months, US economy is facing hardships that it had never experienced before. As the dollar value started to decrease for the past few months, the demand for US in the global market began to recede. Unemployment has also grew a record high 5.5% just last week. Foreclosure rate was the initial push in this staggering economic situation. As people could not pay their mortgage on time, this economic crisis began to take shape. The addition of increasing oil prices played another significant role as the barrel of oil jumped from $10.75 to almost $140 in less than a year. Food prices have also increased a record high in most nations around the world while food production lessened in major food-producing countries. The stock market also hit by this fractured economis crisis when major stock exchanges around the globe received a sharp shock with record low price in its history. As a result of all these crisis in every sectors of the economy, economists would call this situation an aftermath of inflation that is leading to recession, although the White House officials deny this fact.

1. Define & explain GDP.
=>Gross Domestic Product is the total official measure of the market value of all goods and services produced within the geographical border of a nation in a specified time period which is equal to total consumer, investment and government spending with value of imports subtracted from value of exports.
2. How exactly is this figure determined?
=>GDP is calculated by adding private consumption or consumer spending in a nation's economy, sum of government spending, sum of all the country's businesses spending on capital and the nation's total net exports (calculated by subtracting total imports from exports). In other words, GDP figure can be determined by three basic components-consumption (the amount that consumers pay for goods), investment (the amount of money spent on new production facilities), services (the amount that consumers pay for the services they use).
3. Explain how "trade deficit" (net exports) is subtracted or added to achieve a total.
=>Trade Deficit is the difference of total exports minus total imports. The higher this figure is, the more trade deficit a nation faces. For example, according to the US Census Bureau of Economic Analysis through the Department of Commerce calculated that the March 2008 exports was $148.5B while the imports was $206.7B, resulting in a goods and services deficit of $58.2B. March exports was $2.6B less and imports was $6.1B less compared to February 2008 trade deficit.

As the car experts from edmund.com suggests that if someone looks at a car for mere transportation purpose, then it's not worthy to buy a new car, instead buying a used car would be a better choice. Since I don't look at cars as a mean to show off my style, then it won't be a good decision to buy a new car. There's also other aspects that I consider in buying a used car. Other benefits included in buying a used car are-it costs less in insurance, bigger bargains are possible for the smart used car shopper.

After considering all these aspects, I decided to buy a 2006 Mercedes-Benz C-Class. It's monthly payment would be $469.51 for 60 months, thus paying almost $21,676 in total at the end to own this used car. I decided to buy a 2006 model as I don't want to buy a car that's too old or too new. An old car will require more maintenance while a new car will cost more to buy. So, I wanted to buy something in between. A 2006 model fits exactly into that need.

The Federal Reserve degraded short-term interest rate for the sixth time in the past six months on Tuesday as its continuous attempt to strengthen the economy. The central bank shortened its federal funds rate by three-quarters of a percentage point to 2.25% for overnight loans and left the option for future cuts in the upcoming months. Although, this cut was the biggest one-day cut in decades, the investors were expecting a full percentage point in regards to the possible recession and financial crisis that the country is facing right now. However, some members of the Fed's policy-making committee expressed their dissatisfaction over this cut, siding with an even smaller cut while conveying concerns over possible recession. Some view this as a deal to calm those who favored less while others guessed this cut by the Fed was particularly low due to Fed's alternative to get away from zero percent.

Compound interest is a form of interest that adds the accumulated interest back to the principal which allows the interest to grow on the interest from then on. To understand any investment well, one needs to understand the time value of money. Invested money increases in value over time due to the growth from use of production factors like machines, land, labor. In compound interest concept, the interest earned is added to the principal for next time's computation of interest. The time interval between the occasions at which interest is added to the account is known as the compounding period. In contrast, simple interest is increased by the interest earned from the actual principal, the earned interest is not accumulated in the principal for calculation of interest for the next time.

be (72/8=9 years). This formula gives an approximation of the time needed to retain an investment before it doubles in its value. A more accurate calculationThe rule of 72 is a common way used by investors to compute how long it takes for a variable X to double if it's increasing at a given interest rate (r). For example, suppose I have $100 in my bank account that pays 8% interest yearly. Then with the rule of 72, the doubling period would would be X=ln 2/(ln(1+r)).

Using the compound interest calculator, I calculated that if I save $1 daily in an account with the principal of $365 and let it grow for 47 years (age 18 to 65) at an annual compound interest rate of 8%, then I would have $14,078.82 at my retirement age.

• Citigroup: $29.69
• General Electric Company: $36.16
• American International Group Inc: $55.73
• Exxon Mobil Corporation: $85.95
• BP: $64.25
• Bank of America: $45.03
• HSBC: $77.17
• JP Morgan Chase & Co: $48.25
• IBM: $109.08
• Verizon Communications: $38.75

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