Do you want to better understand what is happening in the economy and sound extra smart? Here are 4 terms you should know and understand.
Inflation: Inflation is the decrease of purchasing power of your money. What used to cost $10 now costs $12 because your money is not as valuable. Good economists know that inflation is caused by a growth in the money supply.
Money supply: This is the amount of money in circulation. For example, if more money is “printed” then this will increase the supply of money and increase inflation. There are also other ways to increase the money supply by having the Fed buy government securities.
The Fed: The Fed is short for the Federal Reserve System. This is the central banking system. The Fed has the power to set interest rates, more specifically the federal funds rate, which is the rate at which banks lend to each other overnight.
Unemployment: You probably already know this one, but you should know how it is measured. Technically, to be considered unemployed, you have to not have a job, have not actively looked for work in the past 4 weeks, and are currently not available for work. Technically, unemployment can go down while less people are working.
And here’s a bonus term:
Stagflation: This is a period of high inflation and slow economic growth.
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