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Federal Employees Video Library About Illness, Insurance & Care


5 Economic Terms Everyone Should Know!

5 Economic Terms Everyone Should Know!

Here are 5 Economic Terms You Should Know, and how it can affect your financial plan! Please Like and Subscribe for more content! The state of the economy isn’t just a buzz word – it’s a measurement. Regardless if the economy is growing, shrinking, or unchanged, it will affect the stock market. Here are 5 key terms to help understand how the economy can impact your investment or retirement portfolio. 1. Bull Market – A Bull Market is when prices are rising or expected to rise. Bull Markets are encouraging for investors as most positions increase in value, however it is important to be aware you may be paying near peak price. 2. Bear Market – A Bear Market is when prices are continuing to decrease, indicating that investors are losing confidence. Investors tend to focus on selling, ignoring any good news and pushing prices lower. However, if you have a long term investment plan you may be able to find investments with high upside potential 3. Market Bubble- A market bubble is when investments are overvalued and purchased for more than they are actually worth. The bubble will burst when people realize the cost is too high and prices drastically drop. This is disastrous to those who bought at the highest price and was still holding the investment when prices crash. 4. Inflation- Inflation is the increase in prices and decrease in purchasing power of money. The Federal Reserve targets an inflation rate of 2% to maintain a healthy economy. If inflation gets too high people can’t afford to purchase as much as before. As companies lose sales their value drops, eventually leading to a drop in investment values. Inflation is measured by GDP or Gross Domestic Product, which measures the economy as a whole. 5. Interest Rates- Stock Prices and Interest Rates have an inverse relationship. When Interest rates increase stock prices tend to decrease, and when Interest rates fall stock prices tend to rise. Interest rates are set by the Federal Reserve and can be used to help control inflation. In theory by raising interest rates it costs more to borrow money. If less people are borrowing money then less people are spending money. If less people are spending money demand drops. As demand drops the price drops with it. Hopefully by better understanding these terms you can feel confident in the plan you have created. If you found this video useful please like and subscribe!
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