FOX VALLEY TECHNICAL COLLEGE
ECONOMICS
Article Summary Guidelines
The topic must be related to economics and business; it should be recent (within last 3 months.)
MIA GAUTHIER - INSTRUCTOR
Write out your answers before the class discussion
Title/Show
Fareed Zacaria GPS "What in the World"
Author/Home page
http://www.cnn.com/
http://www.cnn.com/video/#/video/world/2011/05/01/gps.what.in.the.world.cnn?iref=allsearch
Publication/Channel
CNN News Channel
Date:
5/2/2011
Topic:
Inflation, Inflation, Inflation is it really a really a risk?
Main ideas:
(A Brief summary of the article)
This is about a historical speech. Ben Bernanke is the first Fed chairman to ever give a press conference concerning the economy.
Ben Bernanke's
goal is to keep inflation low and to keep employment high.
If the Federal Government can keep interest rates low, it will help people get cheap loans which are good for employment.
Too much borrowing and spending drives up prices and wages, causing inflation.
By raising interest rates, people will take out fewer loans, which will cause a slow-down in economic activity, lowering inflation, also causing less employment.
There is typically an inverse relationship between inflation and interest rate rise, high interest rates equals low inflation, low interest rates = high inflation.
If there is more money in an economy, people tend to spend more, thus (as a whole) driving up the cost of goods and services. If there is less money in an economy, there is less money to spend and low demand means lower prices.
If interest rates are low, money is easier and cheaper to borrow, hence more money in an economy. If rates are high, it is more expensive to borrow, hence less money in an economy.
What did you like about the article?
We are part of a global economy. There are 10's of millions of workers in China and India, producing goods and services at a fraction of the cost of U.S. and Western workers. It is difficult for Western workers to get wage hikes (raises) with all of this global competition. Wage hikes, (wage inflation) are the driving force of over-all inflation in America.
What did you dislike about the article?
Unless you are a banker or a sports-star, your wages have not been going up these days.
How does this article relate to current economic conditions?
The U.S. economy is going through the slowest recovery from a recession in 50 years.
Ben Bernanke is trying to navigate between two somewhat contradictory missions, "to keep inflation low and to keep employment high".
Ben Bernanke's main concern during this financial crisis has been Unemployment.
He understands that the global economy is at a big slow-down.
The Western world is in a massive recession.
He lowered interest rates to try to boost the economy, now he has learned about inflation rates rising; he is now looking to balance these things by raising interest rates once again. The only reason that unemployment numbers are falling right now is because many people have just given up on looking for work.
The way unemployment is calculated is by looking for work and not finding work to be considered unemployed.
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