Why is the economy so bad?

The economy is in such bad shape because there is no equilibrium and stability holding it. Personally, I see that the rich are settled while it is the middle and lower classes that are suffering from this recession. It should be the rich who have to pay more, get taxed more, but it is the lower classes that are forced with this inequality,, because there seems to be a level of inferiority. The economy i s so bad because the unemployment rate has increased. It has spiked .5% which is a lot when you consider that around 49,000 people have lost their jobs. To further add to this, oil prices have jumped from $11 a barrel to a whopping $138. This is not surprising as with the recession, about everything has jumped in price. Also note that the U.S. has spent so much money on imports than exports, which is what led to the deficit and pretty much led to the forcing of a recession. So how does all this make sense when you take the fact that more people are still losing jobs at the moment because there is not enough money for employment, yet the government thinks that by increasing the prices of items that are most needed, like food items, will boost the economy and keep it in shape. The day where we have to pay $3 for a bottle of water is closely looming around the corner, and that will be a scary day.

Buying A Car

What car to buy? This is what goes through every Americans head when they are about to purchase a new car. It is no surprise neither, especially with all the money that is involved, and choosing what car and how to buy it plays a major role in the outcome of later years. I would personally buy a new car, a Nissan Skyline GT-R 34 to be exact, unless of course I was in some sort of financial debt or lacking funds in some way. Considering you buy a car at a certain price, if you buy it new this is the way to go because if you buy it used, you'll be paying double the amount you would of a new car in monthly payments. Leasing a car is out of the question, but then again this is by preference. Leasing a car doesn't give you ownership yet unless you pay off the car, and it's basically a way of renting a car, which is why people who lease cars can drive two or three cars in the span of their lease contract. Does each method of buying a car have their good and bad? Of course, naturally. Leasing a car is also by far the most expensive method of paying a car monthly, but like mentioned before, it is just like renting a car put simply and different cars can be tested out during the contract of the lease.

Fed Helps Market Go Up

The Federal Reserve lowered short-term interest rates for the sixth time in the last six months as it continues to attempt to strengthen the economy. The central bank shortened its federal funds rate by 3/4 of a percentage point to 2.25% for overnight loans and left the option for future cuts in the upcoming months. This cut was the biggest one-day cut in decades, and investors were expecting a full percentage point in regards to the possible recession and financial crisis that the country is facing right now. Members of the Fed's policy-making committee expressed dissatisfaction over this cut, siding with an even smaller cut while conveying concerns over possible recession. Some view this as a potential way for the Fed to ease the economy while others guessed this cut was particularly low due to the Fed's alternative to get away from zero percent. The Fed is also cooperating with the European Central Bank, the Bank of Canada and the Swiss National Bank, to loan investment banks money in exchange for debt. This move is essential in order to help create a market for assets that investors nowadays are scared to buy because of the huge decline in stocks that have been experienced in the past weeks.

Compound Interest and the Rule of 72

When money is borrowed from a bank, you pay interest. Interest is a fee charged for borrowing the bank's money, it is a percentage charged on the principle amount for a period of usually a year. Put in simpler terms, compound interest can be looked as interest paid on the original principal and on the accumulated past interest, so it builds up on both counts. The common formula for compound interest is A=P(1+r)n, these variables may differ but all mean the same thing
P= the principal or initial amount borrowed or deposited
r= annual rate of interest
n= amount of years money is deposited or borrowed
A= total accumulated after n years, including interest

Using the compound interest calculator, if you were to save a $1 a day, approximately $365 p/y and ignoring the rule of leap years, from the age of 18 to 65, which is 47 years, at 8% interest, you will have $178,533.24.

The 'Rule of 72' a simplified way to determine how long an investment will take to double or halve, given a fixed annual rate of interest. Dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself. It is a great meantal math shortcut to estimate the effect of any growth rate, from quick financial calculations to population estimates. The 'Rule of 72' is most accurate when dealing with low rates of returns, as such, when the rates of return get higher or increase the estimate becomes less precise. The formula for the 'Rule of 72' is:
years to double= 72/ interest rate

US Trade Deficit

Explain what the US Trade Deficit is. Why did it go down in December 2007? What does the value of the US dollar have to do with the trade deficit falling? Why do you think that a large trade deficit is bad for the economy? In other words: why is it bad to import more goods than you export?
The U.S. Trade Deficit is the number of imported goods over exported goods. This has to be kept at a state of equilibrium because if imports surpass exports than, in a sense, the U.S. is losing money. You pay to import, but you get paid when exporting. When importing surpasses exporting we face a deficit, and surplus when exports proceed imports. During December of 2007 the U.S. faced a deficit because imports exceeded exports by nearly $58 billion. The value of the U.S. dollar also has importance here because when the value is down, this attracts foreign buyers to buy American products for cheap, subsequently if the dollar value is high, than buyers tend to stay away or there is a limit gap. Therefore, with more buyers prowling America for products, there were more exports and the U.S. was making money. A large enough trade deficit is bad for the economy because that is one way how it can go bankrupt and put the economy in a crisis. That is why it is better to export more than import, that way a country can gain surplus and not have to worry about deficit.

Opportunity Costs

In your own words, explain what economists mean when they talk about opportunity costs. What are opportunity costs? Give some examples. And give some examples from your own life.

An opportunity cost is quite simple to understand. It is something that is given up for something else. In the topic of economics, an opportunity cost is applied dead on within the stock market. You are taking your chances on a certain stock over others, and not knowing what the circumstances might be. Maybe a stock you buy goes down, and the stock you thought of buying goes up. An opportunity cost to me is a gamble between time and money most of the time. Of course, the ideology of opportunity costs can be applied to everyday life, such as cutting a class to hang out with friends, or going to class and getting the most out of it for your future. End college with a bachelor's or continue studying for a better degree. Even something as simple as buying an Xbox 360 or a Playstation 3. Everything has its positives and its negatives, chances that you take when choosing one thing over another.

My Investment Strategy

Why did you pick the stocks that you did?

Everyone has their own stock picks and entitled to their opinions as to why they chose those certain companies they wish to essentially be "a part" of. Well My choices I am going to be sticking to are Amazon(AMZN), Apple (AAPL), Google (GOOG), IBM, and Yahoo! Inc (YHOO). The reason I chose these specific stocks is due to the fact that these stocks usually remain stable, if anything else, go up. Of course there are times of fluctuation where their values will heavily drop, but they pick up rather quick because these are major businesses, corporations, etc., that are relied upon the most. Overall, they have a significant popularity factor that can semi-guarantee a route toward success and is why I chose them. A perfect example would be with the Google stock. It is establishing itself as a powerhouse corporation, and has a high stock value. So due to it's popularity, its value will increase, but if there is a decrease, it won't be for long, but it will be quite a loss in profit. But as expected, it will surely pick itself back up. Same as for the other stocks I chose.