economy

5 Ways the Stock Market Affects the Economy

We have previously written on the effects of the housing market and the economy but in this article, we explore the affects of a stock market on the economy. Even if individuals do not have share portfolios, a crash in the stock market may still affect them. 1.Lower stock prices means less earnings for businesses Businesses will feel the impact of lowering stock market values. When individual‘s net wealth values decrease due to the lowering of value of the stock …

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Why inflation is good for the economy

High inflation has often been considered harmful to the economy. However, it is deflation which can be more harmful to the economy. Economist John Meynard Keynes believed that some inflation was needed to encourage consumers to spend and prevent the paradox of thrift. The paradox of thrift is detrimental to the economy. This is because savings prevents consumers from spending and the economy from growing. Deflation can be a bad for the economy Deflation occurs when all prices fall. Simultaneous …

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Why Australia’s low savings rate could be a big problem

The household savings rates in Australia was only 2.80 percent in the first quarter of 2019. The average savings rate was 9.49 percent from 1959 until 2019 which means that our savings rate is now extremely low when compared to the Australian average.  With many households highly indebted, Australians may be digging into their savings account to cover bills. In this article we look at the problems that can occur with a national low savings rate. Decrease in household expenditure …

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How the government can affect the economy

Governments try and stabilize the economy by maintaining good growth, high levels of employment, and balanced inflation. This can be done through fiscal and monetary policy to influence the prices of goods and employment. The state of the economy has a direct impact on the stock market as it would affect the ability of companies in generating profits. Expansionary policies can lead to increased demand and employment. This in turn can lead to more spending which then increases earnings for …

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What are the causes of a recession?

A recession is defined as two consecutive quarters of negative growth of the country’s GDP. Australia has not had a recession for the last 26 years. Having said that, we have had a low growth environment for the past few years. Recessions affect the stock market as it impacts the ability of individuals to invest in the market. It also affects the ability for companies to generate growth. These are the main causes that can help lead to a recession. …

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