The study of macroeconomics offers insight into the way the economy works on a large scale, revealing patterns and relationships that affect its efficiency and health. From a consumer standpoint, understanding these patterns and relationships makes for responsible decision making in areas such as savings, investments and long-term financial planning.
If a person wishes to take out a loan for nonessential home improvements, macroeconomic forces predict and influence changes in interest rates. This kind of information can help that person make an informed decision to wait a few more months before applying for a loan, ultimately saving hundreds of dollars in interest. If someone wants to start her own business, but is concerned about quitting her current job, an analysis of the labor force and supply and demand can support or refute her plan. If her business subsequently doesn't succeed, going back to work for her previous employer might not be an option, especially in a competitive job market.
The federal government, legislators, and financial institutions all rely on an understanding of macroeconomic principles to keep the economy in a state of balance. These include decisions about inflation, the consumer price index, interest rates, and government spending and borrowing. Without these things, establishing order in the economy would prove all but impossible.Learn More
The formula for the market value of debt is E((1-(1/(1 + R)^Y))/R) + T/(1 + R)^Y, where E is the annual interest expense, R is the cost of debt, T is the total debt and Y is the average maturity, in years, of the debt. However, calculating the market value of debt can be tricky, because not many firms carry their debt in bond form.Full Answer >
An example of the way a market economy works is how new technology is priced very high when it is first available for purchase, but the price goes down when more of that technology becomes available. This kind of price fluctuation is a central component of a market economy. That is, supply and demand dictates prices.Full Answer >
Economics and economic education are important for providing people with valuable insight into how foreign and domestic markets operate, which allows them to make reasoned and rational choices for short-term and long-term financial benefits. Studying economics also allows people to learn how to manage and most effectively use scare and finite resources such as time and money. Studying economics equips people with varying levels of financial literacy, which allows them to effectively manage their own finances and even advise others in financial management and planning, too.Full Answer >
According to the International Monetary Fund, inflation is an important economic statistic because it affects the value of money and indicates the overall stability of a country's economy. Inflation is a gradual continuous increase in the price of goods and services. A stable yearly inflation amount is typically between two and four percent, reports Economics Help.Full Answer >