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| | Unemployment Rate |
 | | Unemployment rates below the natural rate (and economic growth above the 'natural' growth rate) cannot be sustained for too long: they would eventually cause higher inflation and lead the Federal Reserve to increase the Fed Funds rate in order to slow growth and prevent a pickup in inflation. | | | Unlike the payroll jobs data, which is a coincident indicator of economic activity (it changes direction at the same time as the economy), the unemployment rate is a lagging indicator. | | | A falling unemployment rate also make it more likely that the Fed will increase the Fed Funds rate that is also bearish for the bond market. |
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http://pages.stern.nyu.edu/~nroubini/bci/Unemploymentrate.htm
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| | Inflation - Wikipedia, the free encyclopedia |
| | Inflation can be contrasted with "reflation," which is either a rise of prices from a deflated state, or alternately a reduction in the rate of deflation, that is, the general level of prices is falling, but at a decreasing rate. | | | General inflation is a fall in the market value or purchasing power of money within an economy, as compared to currency devaluation which is the fall of the market value of a currency between economies. | | | Since inflation is often the result of government policies to increase the money supply, the government contribution to an inflationary environment is a tax on holding currency. |
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http://en.wikipedia.org/wiki/Inflation
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| | CHAPTER 7 |
| | Annual inflation rates in the U.S. and France are expected to be 4% and 6%, respectively. | | | Suppose annual inflation rates in the U.S. and Mexico are expected to be 6% and 80%, respectively, over the next several years. | | | Annual inflation rates in the U.S. and Greece are expected to be 3% and 8%, respectively. |
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http://www.auburn.edu/~pughwi1/Qchap7.html
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| | Inflation - Wikipedia, the free encyclopedia |
| | Inflation measurements sometimes exclude volatile goods from the basket to be able to gauge the "core" rate of inflation. | | | General inflation is a fall in the purchasing power of money within an economy, as compared to currency devaluation which is the fall of the market value of a currency between economies. | | | Since inflation is often the result of government policies to increase the money supply, the government contribution to an inflationary environment is a tax on holding currency. |
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http://en.wikipedia.org/wiki/Inflation
(5546 words)
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| | TIPS.DOC |
| | The inflation rate duration of the liability is the change in the present value of the liability resulting from a change in the inflation rate, holding the real rate constant. | | | The inflation rate duration of a Treasury Bond is equal to its cash flow duration: the effect of an interest rate change has the same effect on a nominal bond regardless of whether the interest rate change comes from a change in expected inflation or a change in real rates. | | | Since (1) the inflation rate duration and the real rate duration of nominal bonds are the same and (2) the inflation and real rate duration of the liability are different, you need to make a judgement about the relative volatility of inflation and real rates to determine the effective duration of the liability. |
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http://bear.cba.ufl.edu/brown/Fin6547/TIPS.DOC
(1383 words)
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| | social discount rate |
| | The real discount rate (r) approximately equals the nominal discount rate (i) minus the expected rate of inflation (m), and is calculated as: | | | A common approach to estimation the expected rate of inflation is to assume that real long-term bond yields will remain stable and to deduct this yield from the current long-term bond yield. | | | A common approach to estimating the expected rate of inflation is to assume that real long-term bond yields will remain stable and to deduct this yield from the current long-term bond yield. |
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http://www.rri.wvu.edu/WebBook/Garrett/popup/box6.htm
(355 words)
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| | Macroeconomics Quick Quiz |
| | Actual rate of inflation is higher than the expected rate, the unemployment rate will fall to bring the expected rate and actual rates into balance | | | Expected rate of inflation is higher than the actual rate, the unemployment rate will fall to bring the expected and actual rates into balance | | | Expected rate of inflation is lower than the actual rate, the unemployment rate will rise to bring the expected and actual rates into balance |
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http://highered.mcgraw-hill.com/sites/0070886695/student_view0/chapter15/quick_quiz.html
(863 words)
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| | Real and Nominal Interest Rate Determination |
| | How many nominal dollars a lender needs to receive in the future therefore depends on the expected rate of inflation between today and the time when the loan is repaid. | | | Short term interest rates will depend expected inflation in the near future, while longer term interest rates will depend on expected inflation into the more distant future (so that a ten year government bond will yield an interest rate which depends on the expected inflation rate in the next ten years). | | | However, in the longer run all nominal interest rates appear to adjust to inflation in a manner well described by the Fisher equation, once allowance is made for slowly adjusting expectations. |
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http://www.economics.unimelb.edu.au/TLdevelopment/econochat/Crosbyecon00.html
(1149 words)
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| | Understanding Interest Rates |
| | Long-term interest rates, as represented by yields of the 10-year or 30-year Treasury bond, tend to move in anticipation of changes in the economy and inflation. | | | Both short- and long-term interest rates are affected by economic factors such as inflation, the strength of the U.S. dollar and the pace of economic growth. | | | Municipal bonds are also sensitive to interest rate movements because of their generally high credit quality and low default risk. |
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http://www.franklintempleton.com/retail/jsp_cm/sales_tools/feature_prog/tax_free/pub/int_rate_article.jsp
(1193 words)
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| | USATODAY.com - Bush considers factoring inflation for tax break |
| | Inflation indexing would work this way: Currently, if an investor bought stocks worth $10,000 in 1992 and sold them today for $20,000, a 20% capital gains tax — the top rate paid by most investors — would be applied to the $10,000 profit, resulting in a tax bill of $2,000. | | | If Bush decides against indexing capital gains for inflation, aides say, he will ask Congress to lower the maximum capital gains tax rate, which was cut from 28% to 20% in 1997. | | | But using the Consumer Price Index to adjust for inflation over the past 10 years, the taxable amount would be $7,790, for a tax bill of $1,558. |
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http://www.usatoday.com/news/washington/executive/2002-08-21-bush-tax-break_x.htm
(665 words)
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| | Growth versus income: comparing "apples and oranges." (Personal Financial Planning) |
| | An inflation index factor is computed for each year by multiplying the previous year's index by 1 minus the assumed rate of inflation. | | | The tax rate would not be at capital gain rates, but at the ordinary income rates in effect at the time the account was paid. | | | The "balance after tax" is the amount that would be left if the total account were cashed in and any deferred taxes paid. |
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http://www.nysscpa.org/cpajournal/old/16458950.htm
(2012 words)
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| | Chapter 22 |
| | Students will also find that there are numerous costs to the economy from high inflation, but that there is not a consensus on the importance of these costs when inflation is moderate. | | | Unexpectedly high inflation hurts a college that has invested some of its endowment in government bonds because the higher inflation rate means the college is receiving a lower real interest rate than it had planned. | | | Thus the government uses the inflation tax, instead of taxes on income, to finance its spending. |
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http://www.seattlecentral.org/faculty/jhubert/manch22.html
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| | NCPA - Tax Issues - Inflation's Effect On Capital Gains |
| | Even a small increase in inflation would affect investors with capital gains on their portfolios, and they would lose even if Congress and the White House were to agree to reduce capital gains tax rates from 20 percent to 15 percent. | | | Even with that 5 percentage point reduction in rates, all that would be needed to undo the reduction is for the underlying inflation rate to increase by one-third of the nominal rate of return. | | | Inflation is at a near-historic low, but there is no guarantee it will not return, economists warn. |
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http://www.ncpa.org/pi/taxes/pd072999f.html
(388 words)
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| | BuzzCharts: Jerry Bowyer on the Unemployment Rate & Bush on NRO Financial |
| | In the 1970s they invented a statistic called the "misery index" which added the inflation rate with the (yes, you guessed it) unemployment rate. | | | During the recession of '91, Bill Clinton, by way of a willing media, was able to attack George Herbert Walker Bush using unemployment rates that hovered around 7 percent. | | | The point here is that the nation has historically focused on the unemployment rate when it comes to measuring the health of the jobs market. |
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http://www.nationalreview.com/nrof_buzzcharts/bowyer200403050905.asp
(388 words)
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| | Theoretical Spot Rate Curve Calculation |
| | This decline might be viewed as a consequence of the lower-than-expected Canadian inflation rate for the month of August (inflation slowed to 1.9 per cent in August from 2.3 per cent in July). | | | Spot rate curve can be use to price any bond. | | | The theoretical spot rate curve can be constructed from the yield on various treasury securities. |
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http://perso.b2b2c.ca/finmodels/spot_rates.htm
(388 words)
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| | Selecting the Discount Rate |
| | As was explained in the first issue of this newsletter, it is the "real" rate of interest - or observed rate of interest net of the expected rate of inflation - which most financial experts prefer to use for this purpose. | | | Two alternative real rates have been calculated for the GICs and the 10-year bonds: the first uses a forecasted rate of inflation of 2 percent and the second a rate of 3 percent. | | | The discount rate is the interest rate at which it is assumed plaintiffs will invest their awards in order to replace their future streams of losses. |
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http://www.economica.ca/ew13p3.htm
(1346 words)
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| | Real Interest Rate |
| | If you remember the equation for profitability of investment--profitability equals rental rate plus appreciation minus interest cost, you can see that if a capital good is appreciating at the rate of expected inflation, then higher expected inflation reduces the cost of capital (holding the nominal interest rate constant). | | | We use p to denote the rate of inflation, and we use p* to denote the expected rate of inflation. | | | The difference between long-term and short-term rates is called the "yield curve." When bond market investors have a different view of the economy from that of the monetary authority (which in the United States is the Federal Reserve), the yield curve may change in ways that offset changes in short-term interest rates. |
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http://arnoldkling.com/econ/macro/interest.html
(556 words)
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| | Financial Sense Online Market WrapUp with Mike Hartman 05/13/2004 |
| | The surprise inflation number implies producer prices are rising by an annualized rate of 8.4% and caused bonds to fall, the dollar to rise, and stocks to flop around neutral for most of the session. | | | The short version is simply that interest rates need to go higher to arrest the dollars decline and slow inflation, but they cant raise rates significantly because there are too many debts at all levels. | | | The Fed has not raised the federal funds rate yet, but the bond market is demanding higher interest rates for the increasing rate of inflation. |
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http://www.financialsense.com/Market/hartman/2004/0513.html
(556 words)
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| | Levy.Announcements.doc |
| | Moreover, tight labor markets, which occur during periods of strong economic growth when labor demand exceeds supply, generate higher real wages but are not the source of inflation. | | | Inflation is generated by excess demand for all goods and services relative to productive capacity, and is not necessarily generated by strong real growth. | | | Even after a decade in which receding inflation amid strong economic growth and low unemployment revealed the flaws of the NAIRU/Phillips curve framework, the Feds assessment of risks still pits economic growth against inflation as its primary construct for assessing monetary policy. |
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http://www.phil.frb.org/econ/conf/Levy.Announcements.doc
(556 words)
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| | Hussman Funds - "Taylor" your Fed Expectations |
| | As the performance of the economy changes, so does the interest rate that the Fed targets to keep growth and inflation in balance. | | | He starts by adding the current inflation rate to a real funds rate of 2 percent, representing a historically neutral monetary policy. | | | Using the average forecasts for economic growth and inflation, the Taylor implied Fed Funds rate for the fourth quarter is 2.8 percent, with much variability around the estimate because of the disagreement on inflation forecasts. |
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http://www.hussmanfunds.com/rsi/taylorrule.htm
(556 words)
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| | Nominal vs Real Variables |
| | Now suppose the inflation rate is 3% for that year. | | | This 6% is the nominal interest rate, as we have not accounted for inflation. | | | Generally a real variable, such as the real interest rate, is one where the effects of inflation have been factored in. |
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http://www.eco.utexas.edu/graduate/Konstantinova/a20_NomReal.htm
(619 words)
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| | Prime Lending Rate |
| | The Federal Reserve Board increases the prime rate during periods when the economy is growing too fast to discourage inflation, and lowers it when the economy is too sluggish to stimulate growth. | | | The prime rate is the economic indicator used by most credit card companies to determine the interest rate charged on their variable rate credit cards (as opposed to fixed rate credit cards). | | | The prime rate is defined as the interest rate charged by major banks to their "best" (meaning most creditworthy) customers. |
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http://www.bcsalliance.com/prime_rate.html
(587 words)
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| | Unemployment rate drops as job creation rebounds - Sep. 3, 2004 |
| | The Federal Reserve, the nation's central bank, is now all but certain to raise a key short-term interest rate when its policy-makers meet later this month, in a bid to ward off inflation. | | | NEW YORK (CNN/Money) - Job growth rebounded in the United States last month and the unemployment rate dropped unexpectedly, the government reported Friday, in one of the last big employment reports before the November election. | | | CNNfn's Louise Schiavone takes a look at the August jobs report: 144,000 new jobs, unemployment rate at 5.4 percent. |
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http://money.cnn.com/2004/09/03/news/economy/jobless_august
(587 words)
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| | Campbell R. Harvey's Hypertextual Finance Glossary |
| | The rate of interest excluding the effect of expected inflation; that is, the rate that is earned in terms of constant-purchasing-power dollars. | | | A provision governing a municipal revenue project financed by a revenue bond issue, which establishes the rates to be charged users of the new facility. | | | Ratings can also be an evaluation a country's creditworthiness or ability to repay, taking into consideration its estimated percentage default rate and political risk. |
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http://www.duke.edu/~charvey/Classes/wpg/bfglosr.htm
(8527 words)
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| | Inflation Tax |
| | Because they had lent long term at fixed rates, the increases in interest rates caused by higher inflation drained away their net worth, and this drainage was the root cause of the large-scale failures in the 1980s. | | | But if the tax rate at $12,000 is 11%, he will pay $1320 to the government. | | | Deficit financing and inflation are other ways to hide taxes. |
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http://ingrimayne.saintjoe.edu/econ/optional/HideTaxes.html
(777 words)
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| | interest rate Definition |
| | Interest rates often change as a result of inflation and Federal Reserve policies. | | | An interest rate is often expressed as an annual percentage of the principal. | | | A rate which is charged or paid for the use of money. |
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http://www.investorwords.com/2539/interest_rate.html
(258 words)
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| | Bank of EnglandMonetary PolicyMonetary Policy Committee (MPC)Framework |
| | The inflation target of 2% is expressed in terms of an annual rate of inflation based on the Consumer Prices Index (CPI). | | | The Government's inflation target is announced each year by the Chancellor of the Exchequer in the annual Budget statement. | | | The Bank’s monetary policy objective is to deliver price stability – low inflation – and, subject to that, to support the Government’s economic objectives including those for growth and employment. |
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http://www.bankofengland.co.uk/monetarypolicy/framework.htm
(258 words)
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| | Interest Rate Inflation Risk |
| | risk." For the modern investor, interest-rate risk is virtually synonymous with inflation risk. | | | When you buy a 30-year Treasury bond, the biggest risk you are taking is that inflation... | | | Inflation-Indexed Treasury Bonds: Cash Flows, Taxes and Simulated Returns
by Douglas R. Kahl, Ph.D., and Jerry L. Stevens, Ph.D. are designed to eliminate inflation risk by... |
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http://www.affordinterestrates.com/interestrateinflationrisk.html
(185 words)
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| | DOL WHD: Minimum Wage Laws in the States |
| | Beginning January 1, 2001, and annually thereafter, the rate will be adjusted for inflation by a calculation using the consumer price index for urban wage earners and clerical workers for the prior year. | | | Minimum wage rate and overtime provisions applicable to retail and service, commercial support service, food and beverage, and health and medical industries. | | | The 7th day overtime law, which is separate from the minimum wage law differs in coverage from that in the minimum wage law and requires premium pay on the seventh day for those employees who work seven days in any one workweek. |
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http://www.dol.gov/esa/minwage/america.htm
(1998 words)
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